Question

suppose that there is a decrease in government spending of $70 billion, and that the government spending multiplier is ___

Answer 1

The government spending multiplier determines the impact of a change in government spending on aggregate expenditure and GDP. In this case, the multiplier is 2.13, meaning that an increase in government spending of $100 leads to a $213 increase in aggregate expenditure and GDP.

Step-by-step explanation:

The government spending multiplier refers to the impact that a change in government spending has on aggregate expenditure and Gross Domestic Product (GDP). In this example, an increase of $100 in government spending raises aggregate expenditure by $213, resulting in a multiplier of 2.13. This means that for every $1 increase in government spending, GDP increases by $2.13.