If investment increases by $300 and, in response, equilibrium aggregate expenditure increases by
$600, the multiplier is
A) 5.
B) 2.
C) 0.2.
D) 0.5.

Question

Quizplus · Accepted Answer

The multiplier is defined as the change in equilibrium output or income divided by the initial change in investment.

Multiplier = Change in equilibrium aggregate expenditure / Initial change in investment

In this case, the initial change in investment was $300 and the corresponding change in equilibrium aggregate expenditure was $600.

Multiplier = $600 / $300 = 2

Therefore, the answer is B) 2.

If Investment Increases by $300 And, in Response, Equilibrium Aggregate