Other things equal, if $100 billion of government purchases (G) is added to private spending (C + I_g + X_n), GDP will: A)increase by $100 billion. B)increase by more than $100 billion. C)increase by less than $100 billion. D)fall by $100 billion

Question

Quizplus · Accepted Answer

The increase in government purchases will have a multiplier effect on the economy, leading to a total increase in GDP that is more than the initial $100 billion spent.

Other Things Equal, If $100 Billion of Government Purchases (G)