Suppose the Government Spending Multiplier Is 2

question 112

Multiple Choice

Suppose the government spending multiplier is 2.The federal government cuts spending by What is the change in GDP if the price level is not held constant?

• A)an increase of less than $8 billion
• B)an increase equal to $8 billion
• C)an increase of greater than $8 billion
• D)a decrease of less than $8 billion
• E)a decrease of more than $8 billion

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Definitions:

Partial Balance Sheet

A financial statement that shows a portion of a company’s assets, liabilities, and equity at a specific point in time, rather than the complete picture.

Current Assets

Assets that are expected to be converted into cash within one year or within the operating cycle of the business, whichever is longer.

Assets Due

Assets or receivables that are scheduled to be received or settled at a future date.

Maturity Value

The amount that will be payable to the holder of a financial instrument at its maturity date, including principal and interest.