In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.This indicates that a $1 billion increase in government purchases would increase equilibrium real GDP by
A)$1 billion.
B)$1.57 billion.
C)$15.7 billion.
D)$157 billion.

Question

Quizplus · Accepted Answer

The government purchases multiplier of 1.57 indicates that a $1 billion increase in government purchases would increase equilibrium real GDP by $1.57 billion. Therefore, the best choice is B.

In Preparing Their Estimates of the Stimulus Package's Effect on GDP,Obama