Use the Following to Answer Questions

question 94

Multiple Choice

Use the following to answer questions .
Exhibit: Aggregate Expenditures and Real GDP 2
-(Exhibit: Aggregate Expenditures and Real GDP 2) 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.