An autonomous investment change of $2 billion in the first stage,with a multiplier of 2,leads to extra income in the third stage of ________ billion.
A) $4
B) $1
C) $0.5
D) $0.25
E) $0

Question

Quizplus · Accepted Answer

The multiplier effect means that each stage of spending generates additional income. In the third stage, the income generated is the initial change ($2 billion) multiplied by the multiplier (2) raised to the power of the stage number minus one (3-1=2), divided by the stage number (3). So, $2 billion * (2^2) / 3 = $0.5 billion.

An Autonomous Investment Change of $2 Billion in the First