Refer to the above diagram.The sizes of the multipliers associated with changes in investment and government spending in this economy:
A)are 2.5 and 1.5 respectively.
B)are 3 and 2 respectively.
C)are both 2.5.
D)are 2 and 3 respectively.

Question

Refer to the above diagram.The sizes of the multipliers associated with changes in investment and government spending in this economy:
A)are 2.5 and 1.5 respectively. 
B)are 3 and 2 respectively. 
C)are both 2.5. 
D)are 2 and 3 respectively.

Quizplus · Accepted Answer

In the diagram, the slope of the line labeled "change in expenditure" is equal to the expenditure multiplier. The slope associated with changes in investment is 2.5 and the slope associated with changes in government spending is also 2.5. Therefore, the sizes of the multipliers associated with changes in investment and government spending in this economy are both 2.5.

Refer to the Above Diagram