Suppose That an Increase in Government Purchases of $100 Million

question 159

Multiple Choice

Suppose that an increase in government purchases of $100 million caused the aggregate demand curve to shift to the right by $350 million at each price level. What is the value of the multiplier?

• A) 2.5
• B) 3.5
• C) 0.285
• D) $250 million

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Definitions:

Multiply

The arithmetic process of calculating the result of adding a number to itself a certain number of times.

Simplify

To simplify means to reduce an expression or equation to its simplest form, by combining like terms, reducing fractions, etc.

Combine

The process of uniting two or more expressions into a single expression using mathematical operations.

Simplify

The process of making an expression easier to understand or work with by combining like terms, reducing fractions, etc.