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

Question

Quizplus · Accepted Answer

The multiplier effect amplifies the initial increase in government expenditures. With a multiplier of 4, a $15 billion increase 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