If Investment Increases by $300 And, in Response, Equilibrium Aggregate

question 377

Multiple Choice

If investment increases by $300 and, in response, equilibrium aggregate expenditure increases by
$600, the multiplier is

• A) 5.
• B) 2.
• C) 0.2.
• D) 0.5.

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Definitions:

Liquidity Preference Theory

A theory suggesting that people prefer to hold their wealth in liquid form for convenience and as a precaution against uncertainty, affecting interest rates.

Yield Curve

A graphical representation of interest rates on debt for a range of maturities, often used as an indicator of economic expectations and interest rate trends.

Normal

Typically refers to something that conforms to a standard or common pattern; in statistics, a distribution that is symmetrically clustered around its mean.

Treasury Bond

A long-term, fixed-interest government debt security with a maturity of more than ten years.