If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then
A)the multiplier is 0.1.
B)the multiplier is 1.
C)the multiplier is 10.
D)the multiplier is 100.
E)the multiplier is 180.

Question

Quizplus · Accepted Answer

The multiplier is calculated as the change in equilibrium real GDP divided by the initial change in investment spending. Therefore, the multiplier in this case is 200/20 = 10.

If an Increase in Investment Spending of $20 Million Results