A $600 million decrease in investment spending will decrease real GDP by more than $600 million.

Question

Quizplus · Accepted Answer

This is because a decrease in investment spending will not only affect the initial spending amount, but it will also have a multiplier effect on the economy, reducing incomes, consumption spending, and overall output, leading to a larger decrease in GDP than the initial $600 million decrease in investment spending.

A $600 Million Decrease in Investment Spending Will Decrease Real