Suppose There Is a $20 Million Increase in Government Spending

question 74

Multiple Choice

Suppose there is a $20 million increase in government spending. We know that this increase in government spending will cause which of the following to occur?

• A) an increase in equilibrium real GDP and an increase in the multiplier.
• B) an increase in equilibrium real GDP and a reduction in the multiplier.
• C) an increase in equilibrium real GDP and no change in the multiplier.
• D) equilibrium real GDP will increase by exactly $20 million.

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