As a result of an initial increase in investment of $200 billion, real GDP increased by $800 billion. Given this information, the expenditure multiplier equals
A) 2.
B) 6.
C) 4.
D) 1/4.
E) $800 billion.

Question

Quizplus · Accepted Answer

The expenditure multiplier is calculated as the ratio of the change in GDP to the change in investment. In this case, it is $800 billion / $200 billion = 4.

As a Result of an Initial Increase in Investment of $200