The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero.
Figure 10.4
In the figure:
C: Consumption
I 1 and I 2 : Investment
G: Government Spending
X: Exports
-Refer to Figure 10.4. If autonomous government expenditures increase by $250 billion, equilibrium real GDP will:

Question

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero.
Figure 10.4
  In the figure:
C: Consumption
I 1 and I 2 : Investment
G: Government Spending
X: Exports
-Refer to Figure 10.4. If autonomous government expenditures increase by $250 billion, equilibrium real GDP will:

Quizplus · Accepted Answer

An increase in autonomous government expenditures leads to a multiplied increase in equilibrium real GDP due to the multiplier effect. If the multiplier is 2, a $250 billion increase in spending would result in a $500 billion increase in GDP.

The Figure Given Below Represents the Macroeconomic Equilibrium in the Aggregate