An increase in spending by $5 bilion will add OA drectly to isposable income by this amount and cause an increase in national income equal to less than $5 billion due to the multiplier effect. OB. directly to aggregate demand by this amount and lead to an eventual change in national income equal to $5 bilion times the simple multiplier. OC. indirectly to aggregate demand and cause an eventual change in national income equal to $5 billion. OD. indirectly to disposable income, only a fraction of which (determined by the MPC) will then be spent, Le. national income will change by less than $5 billion.

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 6.13P
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b. Using the model from this chapter, explain the effect on GDP from an increase in G by $5 billion.
An increase in spending by $5 billion will add
A. directly to Eisposable income by this amount and cause an increase in national income equal to less than $5 billion due to the multiplier effect.
O B. directly to aggregate demand by this amount and lead to an eventual change in national income equal to $5 billion times the simple multiplier.
O C. indirectly to aggregate demand and cause an eventual change in national income equal to $5 billion.
OD. indirectly to disposable income, only a fraction of which (determined by the MPC) will then be spent, ie. national income will change by less than $5 billion.
Transcribed Image Text:b. Using the model from this chapter, explain the effect on GDP from an increase in G by $5 billion. An increase in spending by $5 billion will add A. directly to Eisposable income by this amount and cause an increase in national income equal to less than $5 billion due to the multiplier effect. O B. directly to aggregate demand by this amount and lead to an eventual change in national income equal to $5 billion times the simple multiplier. O C. indirectly to aggregate demand and cause an eventual change in national income equal to $5 billion. OD. indirectly to disposable income, only a fraction of which (determined by the MPC) will then be spent, ie. national income will change by less than $5 billion.
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