The figure above shows two aggregate expenditure lines.
-In the figure above, what is the size of the multiplier?
A) 0.25
B) 4.0
C) $2 trillion
D) $0.5 trillion
E) More information is needed to determine the size of the multiplier.

Question

The figure above shows two aggregate expenditure lines.
-In the figure above, what is the size of the multiplier?
A) 0.25 
B) 4.0 
C) $2 trillion 
D) $0.5 trillion 
E) More information is needed to determine the size of the multiplier.

Quizplus · Accepted Answer

The size of the multiplier can be determined by calculating the change in equilibrium output (Y) divided by the change in autonomous expenditure (A). In this case, a $0.5 trillion increase in autonomous expenditure leads to a $2 trillion increase in equilibrium output, so the multiplier is 2/0.5 = 4.0.

The Figure Above Shows Two Aggregate Expenditure Lines