Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4
-Refer to Figure 9.4. If aggregate expenditures are represented by AE₂ and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

Question

Refer to the information provided in Figure 9.4 below to answer the questions that follow.

Figure 9.4
-Refer to Figure 9.4. If aggregate expenditures are represented by AE₂ and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

Quizplus · Accepted Answer

The multiplier effect amplifies the initial increase in government spending. If the multiplier is 5, then a $20 billion increase in government spending results in a $100 billion increase in equilibrium aggregate output.

Refer to the Information Provided in Figure 9