The change in real GDP resulting from an initial change in spending can be calculated by
A)dividing the multiplier by the initial change in spending.
B)dividing the initial change in spending by the multiplier.
C)multiplying the multiplier by the initial change in spending.
D)adding the initial change in spending to the multiplier.

Question

Quizplus · Accepted Answer

The change in real GDP is calculated by multiplying the multiplier by the initial change in spending. The multiplier effect amplifies the initial change in spending, leading to a larger overall change in GDP.

The Change in Real GDP Resulting from an Initial Change