Figure 13-5 -Refer to Figure 13-5. Let Y = Real GDP, AE

question 216

Multiple Choice

Figure 13-5
-Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
I_P = Planned Investment. Consider a simple economy where AE = C + I_P, I_P is autonomous
And the consumption function is given by C = $1,000 billion + 0.75Y. What is the value of the multiplier?

• A) 0.75
• B) 1.33
• C) 4.00
• D) It depends on the ∆AE and the ∆Y since the multiplier formula is ∆AE ÷∆Y.