If the Expenditure Multiplier Is 10 and Investment Spending Decreases

question 50

Multiple Choice

If the expenditure multiplier is 10 and investment spending decreases by $1,000 billion,what will be the change in GDP?

• A) -$10,000
• B) $2,500
• C) $1,000
• D) $10,000
• E) -$1,000

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good changes in response to a change in its price, indicating how sensitive consumers are to price changes.

Elastic Section

Part of a demand curve where a small change in price leads to a relatively large change in quantity demanded, indicating high price sensitivity.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good demanded by consumers.

Perfectly Inelastic

A market condition where the quantity demanded or supplied does not change regardless of a price change.