Suppose That an Increase in Government Purchases of $100 Million

question 159

Multiple Choice

Suppose that an increase in government purchases of $100 million caused the aggregate demand curve to shift to the right by $350 million at each price level. What is the value of the multiplier?

• A) 2.5
• B) 3.5
• C) 0.285
• D) $250 million

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Definitions:

Day-to-Day Operations

The routine activities necessary for a business or organization to function efficiently, including administrative and managerial tasks.

Breaches

Instances where a law, agreement, or standard of conduct is violated or broken.

Agency Contract

A legal agreement in which one party, the agent, agrees to act on behalf of another, the principal, typically in a business context.

Nullify

To make something legally void or ineffective, canceling its legal force.