If an increase of $5 million in investment is associated with an increase of $20 million in real Gross Domestic Product (GDP), the multiplier is
A) 1.
B) 2.
C) 4.
D) 5.

Question

Quizplus · Accepted Answer

The multiplier is calculated by dividing the change in real GDP by the initial change in investment. Here, the multiplier is 20/5 = 4. So, for every $1 increase in investment, there is a $4 increase in real GDP. Therefore, choice C) is the correct answer.

If an Increase of $5 Million in Investment Is Associated