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:

Market Average

A statistical measure that represents the overall trend and value of a specific set of stocks or market segments.

Labor Costs

The total amount of financial compensation that businesses must pay to their employees.

Compensation

The total amount of the financial and non-financial pay provided to an employee by an employer in return for work performed as required.

Base Pay Rates

The initial salary given to an employee, excluding additional benefits, bonuses, or increases due to performance or seniority.