Exhibit 11-5
-In an economy characterized by the aggregate expenditure line in Exhibit 11-5,how would a $100 decrease in autonomous government spending impact real GDP?
A)decrease real GDP by $200
B)decrease real GDP by $100
C)no impact on real GDP
D)increase real GDP by $100
E)increase real GDP by $200

Question

Exhibit 11-5 
-In an economy characterized by the aggregate expenditure line in Exhibit 11-5,how would a $100 decrease in autonomous government spending impact real GDP?
A)decrease real GDP by $200 
B)decrease real GDP by $100 
C)no impact on real GDP 
D)increase real GDP by $100 
E)increase real GDP by $200

Quizplus · Accepted Answer

A $100 decrease in autonomous government spending would decrease real GDP by $200 due to the multiplier effect, which amplifies the initial change in spending.

Exhibit 11-5 -In an Economy Characterized by the Aggregate Expenditure Line in Expenditure