A $100 Billion Increase in Government Spending Increases Real GDP

question 39

Multiple Choice

A $100 billion increase in government spending increases Real GDP by $800 billion. Assuming a constant price level,what does the government spending multiplier equal?

• A) 8
• B) 900
• C) 80
• D) 700
• E) 0.125

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Definitions:

Note Issuance

Note issuance involves the creation and offering of a promissory note, a financial instrument wherein the issuer promises to pay a specific amount to the holder on demand or at a future date.

Estimable Liability

A financial obligation or debt that can be measured or estimated with a reasonable level of accuracy.

Probable Likelihood

A high chance or probability that an event will occur.

Accrual

A method of accounting that records income and expenses when they are earned or incurred, regardless of when the cash transactions occur.