What is the change in equilibrium expenditure if the price level remains at 100?
What will be an ideal response?
The initial change in equilibrium expenditure is $200 . The initial effect of the increase in investment increases equilibrium expenditure by the change in investment times the multiplier. The multiplier is 2 and the change in investment is $100 billion, so the initial change in equilibrium expenditure is $200 billion.
You might also like to view...
From 1900 to 1960, Latin America's real GDP grew
A) slower than Europe, Asia, and the U.S. B) as fast or faster than Europe, Asia, and the U.S. C) faster than Europe and the U.S. but slower than Asia. D) faster than Asia, but slower than Europe and the U.S.
The demand curve for a monopolistic competitor is likely to be steeper than that of a monopolist
a. True b. False Indicate whether the statement is true or false
The money multiplier and the income multiplier are two ways of referring to the same concept.
Answer the following statement true (T) or false (F)
Refer to the above figure. A movement from point A to point B for a good is most likely a result of
A. a decrease in the price of that good. B. an expectation of an increase in the relative price of that good. C. an increase in the price of that good. D. an expectation of a decrease in the relative price of that good.