If a $2 billion increase in investment brings about a $5 billion increase in equilibrium expenditure,we know that the multiplier equals
A)10.
B)2.5.
C)4.
D)5.
E)3.

Question

Quizplus · Accepted Answer

The multiplier is calculated as the change in equilibrium expenditure divided by the change in investment. In this case, the change in equilibrium expenditure is $5 billion and the change in investment is $2 billion, so the multiplier is $5 billion / $2 billion = 2.5.

If a $2 Billion Increase in Investment Brings About a $5