Suppose investment increases by $100 and, as a result, GDP ultimately increases by $200.What does the multiplier equal?
A) 1
B) 2
C) 3
D) 4

Question

Suppose investment increases by $100 and, as a result, GDP ultimately increases by $200.What does the multiplier equal?  
A) 1 
B) 2 
C) 3 
D) 4

Quizplus · Accepted Answer

The multiplier represents the change in GDP that results from a change in investment. In this case, the multiplier is equal to the total change in GDP divided by the initial change in investment:

Multiplier = $200/$100 = 2

Therefore, the correct answer is B.

Suppose Investment Increases by $100 And, as a Result, GDP