If a $75 Billion Increase in Autonomous Expenditure Increases Equilibrium

question 91

Multiple Choice

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier is .

• A) $75 billion
• B) 2
• C) 0.625
• D) $225 billion

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Definitions:

Incremental Value

The additional value that is gained from making an investment or conducting a project, compared to doing nothing.

Net Present Value

A financial analysis method used to evaluate the profitability of an investment or project, assessing the value of all future cash flows, both incoming and outgoing.

All-Equity Firms

Companies that are financed entirely through equity without any debt.

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders including those held by institutional investors and restricted shares held by insiders and company officers.