If the Multiplier Is 4, a Decrease in Spending Equal

question 75

Multiple Choice

If the multiplier is 4, a decrease in spending equal to $80 billion will be accompanied by a decrease in GDP of

• A)$480 billion.
• B)$320 billion.
• C)$240 billion.
• D)$84 billion.
• E)$48 billion.

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Definitions:

Kinked-demand Curve Model

An economic model that explains price stability in oligopolistic markets by suggesting that businesses may not raise or lower prices due to the segmented demand curve.

Price Cut

A reduction in the selling price of products or services, typically to attract more buyers or to sell off excess stock.

Equilibrium Price

The price at which the supply of an item matches its demand, leading to a stable market condition where there is neither excess supply nor excess demand.

Equilibrium Output

The level of production at which the quantity of goods supplied equals the quantity of goods demanded, leading to market stability.