A $1.5 trillion increase in investment (a component of autonomous expenditure) leadsequilibrium expenditure to increase from $7.0 trillion to $10.5 trillion. In this case, themultiplier isO a.10.5.O b. 4.67.O C.2.33.O d. 1.50.O e. 7.00.

Answered: A $1.5 trillion increase in investment…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A $1.5 trillion increase in investment (a component of autonomous expenditure) leads
equilibrium expenditure to increase from $7.0 trillion to $10.5 trillion. In this case, the
multiplier is
O a.
10.5.
O b. 4.67.
O C.
2.33.
O d. 1.50.
O e. 7.00.

Expert Solution

Step 1

An increase in autonomous expenditure by $1.5 trillion leads to an increase in equilibrium expenditure by $3.5 trillion, i.e., from $7 trillion to $10.5 trillion.

=> change in autonomous expenditure = $1.5 trillion

=> change in equilibrium expenditure = $3.5 trillion

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