A $100 Billion Increase in Government Spending Increases Real GDP

question 39

Multiple Choice

A $100 billion increase in government spending increases Real GDP by $800 billion. Assuming a constant price level,what does the government spending multiplier equal?

• A) 8
• B) 900
• C) 80
• D) 700
• E) 0.125

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Definitions:

Primary Innovation

The creation, invention, or chance discovery of a completely new idea, method, or device.

Neolithic Revolution

A major turning point in human history, marked by the transition from nomadic hunting and gathering to settled agriculture and community living.

Paleolithic

Relating to the earliest period of the Stone Age, characterized by the use of crude stone tools and hunting and gathering as the primary means of subsistence.

Food Scarcity

A situation where the availability of food is insufficient to meet the needs of the population, often leading to hunger, malnutrition, and increased mortality rates.