Refer to the accompanying figure. Based on the figure, the income-expenditure multiplier equals:
A)0.5.
B)2.
C)5.
D)200.

Question

Refer to the accompanying figure.  Based on the figure, the income-expenditure multiplier equals:
A)0.5. 
B)2. 
C)5. 
D)200.

Quizplus · Accepted Answer

The income-expenditure multiplier is the effect of a one-unit increase in autonomous expenditure on short-run equilibrium output. The diagram reveals that every increase in autonomous expenditures (the vertical intercept)of 200 leads to an increase in short-run equilibrium GDP of 400. This implies an income-expenditure multiplier of 2.

Refer to the Accompanying Figure