Suppose that the government reduces its spending by $10 billion and as a result, equilibrium national income is reduced by $18 billion. The value of the multiplier is:

Name: Suppose that the government reduces its spending by $10 billion and as a result, equilibrium national income is reduced by $18 billion. The value of the multiplier is:
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Question

Quizplus · Accepted Answer

The multiplier is calculated as the change in national income divided by the change in government spending. Here, it is $18 billion / $10 billion = 1.8.

Suppose That the Government Reduces Its Spending by $10 Billion