Consider a simple macro model with government and demand-determined output.If the government wants to reduce equilibrium national income by $20 billion,G must be
A)raised by $20 billion times the simple multiplier.
B)raised by $20 billion divided by the simple multiplier.
C)lowered by $20 billion times the simple multiplier.
D)lowered by $20 billion divided by the simple multiplier.
E)lowered by $20 billion.

Question

Quizplus · Accepted Answer

To reduce equilibrium national income by $20 billion, government spending (G) must be lowered by $20 billion divided by the simple multiplier, as the multiplier effect amplifies the initial change in spending.

Consider a Simple Macro Model with Government and Demand-Determined Output