If the expenditure multiplier is 10 and investment spending decreases by $1,000 billion,what will be the change in GDP?
A) -$10,000
B) $2,500
C) $1,000
D) $10,000
E) -$1,000

Question

Quizplus · Accepted Answer

The expenditure multiplier effect means that a change in investment spending will lead to a larger change in GDP. With a multiplier of 10, a $1,000 billion decrease in investment will result in a $10,000 billion decrease in GDP.

If the Expenditure Multiplier Is 10 and Investment Spending Decreases