Refer to the information provided in Table 9.6 below to answer the questions that follow.
Table 9.6
All Figures in Billions of Dollars
-Refer to Table 9.6. The economy is at the equilibrium level of output. If government spending increases to a level of $400 billion, the new equilibrium level of output is

Question

Refer to the information provided in Table 9.6 below to answer the questions that follow.
Table 9.6
All Figures in Billions of Dollars 
-Refer to Table 9.6. The economy is at the equilibrium level of output. If government spending increases to a level of $400 billion, the new equilibrium level of output is

Quizplus · Accepted Answer

The increase in government spending leads to a multiplier effect on the overall economy. Given that the multiplier effect amplifies the initial increase in spending, and assuming a simple multiplier model where the multiplier is calculated based on the marginal propensity to consume (MPC), an increase in government spending will result in a multiplied increase in the overall equilibrium level of output. Without the specific numbers from Table 9.6, such as the initial level of government spending, the MPC, or the initial equilibrium output, we apply the general principle that an increase in government spending increases the aggregate demand, which in turn increases the equilibrium level of output. Option B suggests a significant increase, which aligns with the effects of a multiplier in an economy.

Refer to the Information Provided in Table 9