FIGURE 23-5 -Refer to Figure 23-5.Suppose That an Increase in Government Purchases

question 65

Multiple Choice

FIGURE 23-5
-Refer to Figure 23-5.Suppose that an increase in government purchases caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then what is the value of the multiplier?

• A)1.2
• B)1.4
• C)4
• D)2.8
• E)3.2

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Definitions:

Elastic

Describes the responsiveness of the quantity demanded or supplied of a good or service to a change in its price.

Price Elasticity

A measure that describes how the quantity demanded of a good changes in response to a change in its price.

Quantity Supplied

The quantity of a product or service that sellers are ready and capable of offering for sale at a certain price during a designated period.

Demand

The amount of a product or service that buyers are prepared and capable of buying at different price levels within a given time frame.