If the expenditure multiplier is 2.5 and investment spending increases by $2,000 billion,what will be the change in GDP?
A) $2,000 billion
B) $5,000 billion
C) $571.4 billion
D) $3,500 billion
E) $7,000 billion

Question

Quizplus · Accepted Answer

The change in GDP is calculated by multiplying the expenditure multiplier by the change in investment spending. Here, 2.5 (multiplier) x $2,000 billion (investment increase) = $5,000 billion.

If the Expenditure Multiplier Is 2