Figure 27-11
-Refer to Figure 27-11. If government purchases increase by $100 billion and lead to an ultimate increase in aggregate demand as shown in the graph, the difference in real GDP between point A and point B will be
A) $100 billion.
B) less than $100 billion.
C) more than $100 billion.
D) There is insufficient information given here to draw a conclusion.

Question

Figure 27-11 
-Refer to Figure 27-11. If government purchases increase by $100 billion and lead to an ultimate increase in aggregate demand as shown in the graph, the difference in real GDP between point A and point B will be
A) $100 billion. 
B) less than $100 billion. 
C) more than $100 billion. 
D) There is insufficient information given here to draw a conclusion.

Quizplus · Accepted Answer

An increase in government purchases typically has a multiplier effect on the economy, leading to a greater ultimate increase in aggregate demand than the initial spending amount. Therefore, the difference in real GDP between point A and point B would be more than $100 billion.

Figure 27-11 -Refer to Figure 27-11. If Government Purchases Increase by $100