If the multiplier in an economy is 5, a $20 billion increase in net exports will
A) increase GDP by $100 billion.
B) reduce GDP by $4 billion.
C) decrease GDP by $100 billion.
D) increase GDP by $20 billion.

Question

Quizplus · Accepted Answer

The multiplier effect amplifies the initial change in spending. With a multiplier of 5, a $20 billion increase in net exports will increase GDP by 5 times that amount, which is $100 billion.

If the Multiplier in an Economy Is 5, a $20