A $30 billion increase in government spending increases Real GDP by $150 billion. Assuming a constant price level,what does the government spending multiplier equal?

Question

Quizplus · Accepted Answer

The spending multiplier is calculated as the change in Real GDP divided by the change in government spending. From the given information, we have: multiplier = change in Real GDP/change in government spending = $150 billion/$30 billion = 5. Therefore, the correct choice is C).

A $30 Billion Increase in Government Spending Increases Real GDP