If the government spending multiplier is 10 and government purchases decrease by $20 billion, output will decrease by

Question

Quizplus · Accepted Answer

The government spending multiplier effect indicates how much the GDP changes in response to a change in government spending. If the multiplier is 10 and government purchases decrease by $20 billion, the total decrease in output will be 10 times that amount, which is $200 billion.

If the Government Spending Multiplier Is 10 and Government Purchases