The change in real GDP resulting from an initial change in spending can be calculated by:
A) Dividing the multiplier by the initial change in spending
B) Dividing the initial change in spending by the multiplier
C) Multiplying the multiplier by the initial change in spending
D) Adding the initial change in spending to the multiplier

Question

Quizplus · Accepted Answer

The multiplier effect is calculated by multiplying the initial change in spending by the multiplier. Therefore, to calculate the change in real GDP resulting from an initial change in spending, we need to multiply the initial change in spending by the multiplier.

The Change in Real GDP Resulting from an Initial Change