The total government expenditure multiplier
A) is the ratio of total increase in real output to the increase in government spending.
B) is the total increase in the demand for goods.
C) equals
D) is the ratio of total increase in demand for goods to the increase in government spending.
E) equals the MPC.

Question

The total government expenditure multiplier
A) is the ratio of total increase in real output to the increase in government spending. 
B) is the total increase in the demand for goods. 
C) equals 
D) is the ratio of total increase in demand for goods to the increase in government spending. 
E) equals the MPC.

Quizplus · Accepted Answer

The total government expenditure multiplier is the ratio of the total increase in real output (GDP) to the increase in government spending. This is because an increase in government spending injects money into the economy, which increases the demand for goods and services, leading to an increase in production and real output. The magnitude of this increase is measured by the expenditure multiplier, which is equal to the ratio of the change in GDP to the change in government spending.

The Total Government Expenditure Multiplier