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 ________ increase in government purchases would increase equilibrium real GDP by $157 billion
A)$1 billion
B)$10 billion
C)$100 billion
D)$157 billion

Question

Quizplus · Accepted Answer

The government purchases multiplier of 1.57 indicates that for every $1 increase in government purchases, the equilibrium real GDP will increase by $1.57. Therefore, a $100 billion increase in government purchases would result in a $157 billion increase in equilibrium real GDP.

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