Suppose the multiplier is 4.What would be the cause of a $10 billion increase in autonomous investment?
A) a $10 billion increase in equilibrium investment
B) a $40 billion increase in equilibrium investment
C) a $40 billion increase in equilibrium real GDP demanded
D) a $400 billion increase in equilibrium real GDP demanded

Question

Suppose the multiplier is 4.What would be the cause of a $10 billion increase in autonomous investment?  
A) a $10 billion increase in equilibrium investment 
B) a $40 billion increase in equilibrium investment 
C) a $40 billion increase in equilibrium real GDP demanded 
D) a $400 billion increase in equilibrium real GDP demanded

Quizplus · Accepted Answer

The multiplier effect indicates that an initial change in autonomous investment will lead to a larger change in equilibrium real GDP demanded. With a multiplier of 4, a $10 billion increase in investment results in a $40 billion increase in GDP demanded.

Suppose the Multiplier Is 4