Suppose the Government Spending Multiplier Is 1

question 99

Multiple Choice

Suppose the government spending multiplier is 1.5.This means that

• A) a $1 decline in government spending will raise Real GDP by $1.50.
• B) a $1 rise in government spending will raise both total spending and Real GDP (assuming prices are constant)by $1.50.
• C) a $1 rise in government spending will raise investment spending by $1.50.
• D) a $1 rise in government spending will change interest rates by 1.50 times what it was before the $1 rise in government spending.
• E) none of the above

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