Suppose the multiplier is 3.What would be the cause of a $20 billion increase in autonomous consumption?
A) a $20 billion increase in equilibrium consumption
B) a $60 billion increase in equilibrium consumption
C) a $20 billion increase in equilibrium real GDP demanded
D) a $60 billion increase in equilibrium real GDP demanded

Question

Suppose the multiplier is 3.What would be the cause of a $20 billion increase in autonomous consumption?  
A) a $20 billion increase in equilibrium consumption 
B) a $60 billion increase in equilibrium consumption 
C) a $20 billion increase in equilibrium real GDP demanded 
D) a $60 billion increase in equilibrium real GDP demanded

Quizplus · Accepted Answer

If the multiplier is 3 and autonomous consumption increases by $20 billion, then total consumption will increase by 3 times that amount, which is $60 billion. This will lead to a $60 billion increase in equilibrium real GDP demanded, as consumption is one of the components of aggregate demand. Therefore, choice D is the best answer.

Suppose the Multiplier Is 3