If the price level is constant and the slope of the AE curve is 0.75, a decrease in investment of $100 leads to a decrease in real GDP of
A) $25.
B) $100.
C) $800.
D) $400.

Name: If the price level is constant and the slope of the AE curve is 0.75, a decrease in investment of $100 leads to a decrease in real GDP of A) $25. B) $100. C) $800. D) $400.
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Question

Quizplus · Accepted Answer

The multiplier is 1/(1-0.75) = 4. A decrease in investment of $100 leads to a decrease in real GDP of 4 * $100 = $400.

If the Price Level Is Constant and the Slope of the AE