Suppose the government expenditure increases by $200 and the simple spending multiplier equals 5.The final increase in output will be:
A)$6000.
B)$500.
C)$200.
D)more than $200.
E)less than $200.

Question

Quizplus · Accepted Answer

The final increase in output will be more than $200 because the multiplier effect implies that an initial increase in spending will lead to a larger increase in output. Given a multiplier of 5, the total increase in output would actually be $200 * 5 = $1000, which is more than $200.

Suppose the Government Expenditure Increases by $200 and the Simple