A $100 billion increase in government spending increases Real GDP by $800 billion. Assuming a constant price level,what does the government spending multiplier equal?

Question

Quizplus · Accepted Answer

The government spending multiplier is calculated by dividing the change in real GDP by the change in government spending. In this case, the change in real GDP is $800 billion and the change in government spending is $100 billion, so the government spending multiplier is 8.

A $100 Billion Increase in Government Spending Increases Real GDP