If a $200 Billion Increase in Investment Spending Creates $200

question 103

Multiple Choice

If a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the multiplier in the economy is

• A) 4.
• B) 5.
• C) 3.33.
• D) 2.5.

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Definitions:

Geometric Sequence

A series of numbers in which each subsequent term is derived by multiplying the term before it by a constant, non-zero figure referred to as the ratio.

Population

In statistics, population refers to the entire group of individuals or items that a study intends to investigate or draw conclusions from.

Rate

A ratio that measures how one quantity changes in relation to another.

Sum

The outcome of summing two or more numbers.