In Preparing Their Estimates of the Stimulus Package's Effect on GDP,Obama

question 135

Multiple Choice

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.This indicates that a $1 billion increase in government purchases would increase equilibrium real GDP by

• A)$1 billion.
• B)$1.57 billion.
• C)$15.7 billion.
• D)$157 billion.

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Definitions:

Price-Elastic

Price-elastic refers to the responsiveness of the quantity demanded or supplied of a good to a change in its price; high elasticity means quantity changes significantly with price changes.

Amtrak Train Service

A government-owned corporation that provides intercity passenger train service in the United States.

Other Passengers

Individuals sharing a transport service such as a bus, plane, or carpool, not including the service provider or driver.

Elastic Demand

Describes a market situation in which the quantity demanded of a good or service significantly changes in response to a change in price.