The figure above shows two aggregate expenditure lines.
-In the figure above, what is the size of the multiplier?
A) 4.0
B) 0.25
C) $2 trillion
D) $0.5 trillion
E) More information is needed to determine the size of the multiplier.

Question

The figure above shows two aggregate expenditure lines.
-In the figure above, what is the size of the multiplier?
A) 4.0 
B) 0.25 
C) $2 trillion 
D) $0.5 trillion 
E) More information is needed to determine the size of the multiplier.

Quizplus · Accepted Answer

The multiplier is the change in GDP divided by the change in government spending. In this case, the change in GDP is $4 trillion and the change in government spending is $1 trillion, so the multiplier is 4.

The Figure Above Shows Two Aggregate Expenditure Lines