If an Increase in Investment Spending of $50 Million Results

question 288

Multiple Choice

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP,then

• A)the multiplier is 0.125.
• B)the multiplier is 3.5.
• C)the multiplier is 8.
• D)the multiplier is 50.

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Definitions:

Investment Spending

The expenditure on physical assets like buildings, machinery, and equipment which is used to produce goods and services in the future.

Government Policy

Strategies or actions taken by a government to influence its economy or society, which may include laws, regulations, decisions, and actions.

Private Saving

The portion of individuals' or households' income that is not consumed and is instead saved or invested.

Public Saving

The difference between government tax revenues and government spending. If positive, it indicates a budget surplus; if negative, a deficit.