A $200 million increase in investment spending will increase real GDP by exactly $200 million.

Question

Quizplus · Accepted Answer

The relationship between investment spending and real GDP is not one-to-one. It depends on various other factors such as the multiplier effect, the velocity of money, and the capacity utilization rate. Therefore, a $200 million increase in investment spending may have a larger or smaller impact on real GDP than $200 million.

A $200 Million Increase in Investment Spending Will Increase Real