Suppose the Multiplier Is 2

question 29

Multiple Choice

Suppose the multiplier is 2.5 and investment increases by $20 billion. Starting at potential GDP, in the long run, equilibrium real GDP

• A)increases by $50 billion.
• B)increases by more than $50 billion.
• C)decreases by less than $50 billion.
• D)does not change.
• E)increases by less than $50 billion.

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Definitions:

Concrete Operational Reasoning

A stage in Piaget's theory of cognitive development where children aged 7 to 11 begin to think logically about concrete events but have difficulty understanding abstract or hypothetical concepts.

Comprehension

The ability to understand and grasp the meaning of spoken or written language and concepts.

Vocabulary

The collection of words that a person knows and utilizes in a specific language.

Pragmatics

The study of how context influences the interpretation of meaning in language, including assumptions, implications, and social rules of communication.