$$\begin{array} { | l | l | }
\hline \begin{array} { l }
\text { Real GDP } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { l }
\text { A ggregate } \
\text { expenditure } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} \
\hline 0 & 0.3 \
\hline 1.0 & 1.2 \
\hline 2.0 & 2.1 \
\hline 3.0 & 3.0 \
\hline 4.0 & 3.9 \
\hline 5.0 & 4.8 \
\hline
\end{array}$$
-In the above table, suppose investment decreases by $0.1 trillion. The multiplier equals
A) 9.0.
B) 10.0.
C) 5.0.
D) None of the above answers are correct.

Question

$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Real GDP } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { A ggregate } \
\text { expenditure } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} \
\hline 0 & 0.3 \
\hline 1.0 & 1.2 \
\hline 2.0 & 2.1 \
\hline 3.0 & 3.0 \
\hline 4.0 & 3.9 \
\hline 5.0 & 4.8 \
\hline
\end{array}$$
-In the above table, suppose investment decreases by $0.1 trillion. The multiplier equals
A) 9.0.
B) 10.0.
C) 5.0.
D) None of the above answers are correct.

Quizplus · Accepted Answer

The multiplier is the change in aggregate expenditure divided by the change in investment. In this case, the change in investment is -$0.1 trillion, and the change in aggregate expenditure is -$0.9 trillion. Therefore, the multiplier is -$0.9 trillion / -$0.1 trillion = 9.0.

-In the Above Table, Suppose Investment Decreases by $0