Suppose an Economy Is Initially in Equilibrium at $800 Billion

question 23

Essay

Suppose an economy is initially in equilibrium at $800 billion and investment increases by $10 billion. This causes the economy to expand to $1200 billion. Calculate the value of the multiplier.

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Definitions:

Primacy Effect

A cognitive phenomenon where items or information presented first are remembered better than those presented later.

Short-term Memory Capacity

The amount of information that can be held in the short-term memory for a brief period, typically regarded as lasting 20 to 30 seconds.

Chunking

A cognitive strategy for organizing information into meaningful groups or chunks to enhance memory and recall.

Parallel Search

A search for information in which several stores or slots of information are simultaneously examined to match to the target.