Assuming that the government cannot act immediately and the multiplier takes effect, ultimately creating an expansionary gap of $10 billion dollars. To close this gap, government purchases must be:

Question

Quizplus · Accepted Answer

Due to the income-expenditure multiplier, a short-run expansionary gap of $10 billion can be closed with decreased government purchases of less than $10 billion.

Assuming That the Government Cannot Act Immediately and the Multiplier