Assuming that the government cannot act immediately and the multiplier takes effect, ultimately creating a recessionary gap of $1 billion dollars. To close this gap, government purchases must be:

Question

Quizplus · Accepted Answer

Due to the income-expenditure multiplier, a short-run recessionary gap of $1 billion can be closed with new government purchases of less than $1 billion.

Assuming That the Government Cannot Act Immediately and the Multiplier