The Short-Run Multiplier Is Equal to 3, Real GDP Equals

question 258

Multiple Choice

The short-run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price level is equal to 100. Suppose that government expenditure decreases by $200. The long-run effect of the decrease in government expenditure changes real GDP by

• A) nothing; that is, in the long run real GDP equals $8,000.
• B) a decrease of $200 because the long-run multiplier is 1.
• C) a decrease of 600.
• D) an increase of 600.

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Definitions:

Population

The total number of individuals occupying an area or making up a whole, often studied in terms of size, density, and distribution.

Operationalization

The process of defining research variables into measurable factors.

Independent Variable

In scientific studies, a variable that is intentionally altered to examine how it impacts a dependent variable.

Validity

The quality of being logically or factually sound; the degree to which a concept, conclusion, or measurement is well-founded and corresponds accurately to the real world.