If the government spending multiplier is 5 and government spending decreases by $200 billion, output will ________ by $________ billion.

Question

Quizplus · Accepted Answer

If the government spending multiplier is 5, it means that every $1 change in government spending leads to a $5 change in output. So, if government spending decreases by $200 billion, it will lead to a decrease in output by $1,000 billion ($200 billion x 5). Therefore, option B is the correct answer.

If the Government Spending Multiplier Is 5 and Government Spending