If the Government Purchases Multiplier Equals 2, and Real GDP

question 29

Multiple Choice

If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential GDP $14.5 trillion, then government purchases would need to increase by ________ to restore the economy to potential GDP.

• A)$7.25 trillion
• B)$1 trillion
• C)$500 billion
• D)$250 billion

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Definitions:

State Of The Economy

The general condition of a nation's economic system in terms of growth, stability, and overall health.

Wage Earner

Refers to an individual who receives a regular salary or wages, typically in exchange for providing labor to an employer.

Preschool Children

Refers to young children, typically aged between 2 and 5 years, who are in the initial stages of formal education prior to attending kindergarten.

Achieved Status

A social position that a person gains as a result of personal effort, talent, or accomplishment, rather than by virtue of birth.