The Short-Run Multiplier Is Equal to 3, Real GDP Equals

question 223

Multiple Choice

The short-run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price level is equal to 100. Suppose that government expenditure decreases by $200. The long-run effect of the decrease in government expenditure changes real GDP by

• A) a decrease of 600.
• B) an increase of 600.
• C) nothing; that is, in the long run real GDP equals $8,000.
• D) a decrease of $200 because in the long-run, the multiplier is 1.

---

Definitions:

Soldiers

Members of an army, trained and employed to engage in combat and military operations, serving the defense and interests of their country.

France

A country in Western Europe known for its history, art, fashion, and cuisine, famous for landmarks like the Eiffel Tower and the Louvre Museum, and significant for its influence on world politics, culture, and economy.

Easter Rising

An armed insurrection in Ireland during Easter Week, April 1916, by Irish republicans to end British rule in Ireland and establish an independent Irish Republic.

British

Relating to Great Britain or the United Kingdom, including its people, culture, and historical context.