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Calculate the multiplier: Real GDP: $250 , $300, $350, $400 Aggregate Expenditure: $280, $320, $360, $400 Options: a
Calculate the multiplier:
Real GDP: $250 , $300, $350, $400
Aggregate Expenditure: $280, $320, $360, $400
Options:
a. 0.8
b. 3
c. 2
d. 5
Expert Solution
Computation of Multiplier:
Multiplier = Change in Consumption/Change in Income
Here,
Change in Consumption or Aggregate Expenditure = $320 - $280 = $40; $360 - $320 = $40; $400 - $360 = $40
Change in Income or Real GDP = $300 - $250 = $50; $350 - $300 = $50; $400 - $350 = $50
Multiplier = $40/$50 = 0.8
So, the correct option is A "0.8".
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