When the multiplier is _{--------------------} , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $400 billion. When the multiplier is _{--------------------} , an autonomous decrease in
Investment of $200 billion decreases equilibrium real GDP by $800 billion.

Question

Quizplus · Accepted Answer

The multiplier effect is calculated as the change in GDP divided by the change in investment. For a $200 billion decrease in investment to result in a $400 billion decrease in GDP, the multiplier must be 2.0. For a $200 billion decrease in investment to result in an $800 billion decrease in GDP, the multiplier must be 4.0.

When the Multiplier Is -------------------- , an Autonomous Decrease in Investment

When the Multiplier Is _{--------------------} , an Autonomous Decrease in Investment