The multiplier is 5 and,as a result of a change in expenditure,equilibrium expenditure and real GDP change by $200 billion.What was the initial change in autonomous expenditure?
A)$20 billion
B)$40 billion
C)$200 billion
D)$1,000 billion
E)$50 billion

Question

Quizplus · Accepted Answer

According to the formula for the multiplier, the change in equilibrium expenditure is equal to the initial change in autonomous expenditure multiplied by the multiplier. Therefore, we can use the following equation to solve for the initial change in autonomous expenditure: 
ΔY = multiplier × ΔAutonomous expenditure 
ΔY = $200 billion 
Multiplier = 5 
$200 billion = 5 × ΔAutonomous expenditure 
ΔAutonomous expenditure = $40 billion 
Therefore, the initial change in autonomous expenditure was $40 billion. 
Thus, the correct answer is B.

The Multiplier Is 5 And,as a Result of a Change