If the value of the government multiplier is 1.5,which of the following is likely to be true if all other variables remain unchanged?
A) A $1 increase in government expenditure increases GDP by $1.50.
B) A $1 increase in government expenditure reduces GDP by $1.50.
C) A $1.50 increase in government expenditure increases GDP by $1.50.
D) A $1.50 increase in government expenditure reduces GDP by $1.50.

Question

Quizplus · Accepted Answer

A value of 1.5 for the government multiplier indicates that a $1 increase in government expenditure will lead to an increase in GDP by $1.50. This means that the impact of government spending on the economy is positive and results in a greater overall output. Therefore, option A is likely to be true if all other variables remain unchanged.

If the Value of the Government Multiplier Is 1