If the Spending Multiplier Is Equal to 5, Then a $1

question 44

Multiple Choice

If the spending multiplier is equal to 5, then a $1 initial increase in investment spending will lead to a:

• A)5 percent decrease in real GDP.
• B)5 percent increase in real GDP.
• C)$5 decrease in real GDP.
• D)$5 increase in real GDP.
• E)0.05 percent increase in real GDP.

---

Definitions:

Serial Bonds

A sequence of small bond issues of progressively longer maturity.

Primary Market

The market where firms raise financial capital.

New Issues

Refers to securities or stocks that are being offered to the public for the first time, typically through an initial public offering (IPO).