If the multiplier is 4, a $15 billion increase in government expenditures will shift the AD curve to the:
A)right by $15 billion.
B)left by $15 billion.
C)right by $60 billion.
D)left by $60 billion.

Question

Quizplus · Accepted Answer

The multiplier effect indicates that an initial increase in spending will lead to a larger increase in the overall economic activity. With a multiplier of 4, a $15 billion increase in government expenditures will result in a total increase in aggregate demand of $15 billion x 4 = $60 billion, shifting the AD curve to the right by $60 billion.

If the Multiplier Is 4, a $15 Billion Increase in Government