Some economists argue that the spending multiplier is actually less than 1.If the spending multiplier is 0.8,then a $200 billion increase in government spending will cause private sector spending to
A) rise by $160 billion.
B) rise by $40 billion.
C) fall by $40 billion.
D) fall by $160 billion.

Question

Quizplus · Accepted Answer

The spending multiplier tells us how much GDP will increase for every $1 increase in government spending. The difference between the increase in GDP and the increase in government spending is due to private sector spending changes.

Some Economists Argue That the Spending Multiplier Is Actually Less