If the increase in Aggregate Demand (AD) is represented by ΔY, what is the relationship to the multiplier?

The correct choice reflects the fundamental principle of how the multiplier effect relates to changes in Aggregate Demand (AD) and the resulting change in national income or output (represented as ΔY). The equation ΔY = K × ΔAD illustrates that the change in income (ΔY) is equal to the multiplier (K) times the change in Aggregate Demand (ΔAD).

The multiplier effect occurs because an initial increase in spending (for example, by the government or consumers) leads to increased income for those who receive that spending. This new income, in turn, is likely to be spent again, creating a further increase in demand and income. The multiplier (K) quantifies this relationship, indicating how much total output changes in response to an initial change in spending.

Thus, if you know the change in Aggregate Demand, multiplying it by the multiplier gives you the resultant change in total output. This is a key concept in macroeconomics that describes how economic activity can accelerate through interconnected spending behaviors.

The other choices do not accurately represent the relationship between ΔY, the multiplier, and ΔAD. For instance, addition, division, or subtraction would misrepresent how changes in AD influence total output through the multiplier effect.