If the multiplier is 4,a $10 billion increase in autonomous investment will cause a
A)$10 billion increase in equilibrium investment
B)$40 billion increase in equilibrium investment
C)$40 billion increase in equilibrium real GDP demanded
D)$400 billion increase in equilibrium real GDP demanded
E)$40 billion increase in consumption spending

Question

Quizplus · Accepted Answer

The multiplier effect means that a $10 billion increase in autonomous investment will lead to a $40 billion increase in equilibrium real GDP demanded, as the multiplier is 4.

If the Multiplier Is 4,a $10 Billion Increase in Autonomous