Question

suppose that there is an increase in government spending of $50 billion, and that the government spending multiplier is 2. does real gdp increase or decrease? by how much?

Answer 1

An increase in government spending of $50 billion, with a multiplier of 2, would lead to a total increase in real GDP of $100 billion.

Step-by-step explanation:

The increase in government spending of $50 billion, combined with a government spending multiplier of 2, would lead to a total increase in real GDP of $100 billion.

The multiplier effect occurs when an initial increase in spending leads to a larger increase in overall economic output. In this case, the government spending multiplier of 2 means that for every $1 increase in government spending, the overall real GDP increases by $2.

Therefore, a $50 billion increase in government spending would result in a $100 billion increase in real GDP.