Suppose the Multiplier Is 2

question 34

Multiple Choice

Suppose the multiplier is 2.5 and investment increases by $20 billion.Starting at potential GDP, in the long run, equilibrium real GDP

• A)increases by $50 billion.
• B)increases by more than $50 billion.
• C)decreases by less than $50 billion.
• D)increases by an amount greater than zero but less than $50 billion.
• E)does not change.

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Definitions:

Utility Function

A mathematical representation that describes how consumers rank preferences among different commodity bundles.

Campers' Utility

A hypothetical measure of the satisfaction or happiness that campers gain from participating in camping activities or utilizing camping facilities.

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be either positive or negative.

Groschens

A historic European coin of small denomination, particularly used in Austria and Germany.