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

question 73

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

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Definitions:

Normal Standards

Benchmarks used for budgeting and performance evaluation, representing expected efficiency and costs under normal conditions.

Direct Labor Time Variance

The difference between the expected time to produce a product or service and the actual time taken, often used to measure efficiency.

Actual Staff Hours

Actual staff hours are the real number of hours worked by employees, as recorded for payroll or project management purposes, distinct from scheduled or estimated hours.

Standard Rate Per Hour

The set amount paid for an hour of work, often used in budgeting labor costs for projects or operations.