China injects $100 into the United States by purchasing new software. If the spending multiplier for the U.S. is 5, then the total increase in spending will be:
A) $10.
B) $20.
C) $250.
D) $500.

Question

Quizplus · Accepted Answer

The spending multiplier effect means that an initial injection of spending will lead to a greater total increase in spending. With a multiplier of 5, the total increase in spending is 5 times the initial amount: $100 x 5 = $500.

China Injects $100 into the United States by Purchasing New