If Short-Run Equilibrium Output Equals 10,000, the Income-Expenditure Multiplier Equals

question 109

Multiple Choice

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 10, and potential output (Y*) equals 9,000, then government purchases must ________ to eliminate any output gap.

• A)increase by 100
• B)decrease by 100
• C)increase by 1,000
• D)decrease by 1,000

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