Suppose that economists estimate that consumers spend 80% of any increase in their disposable income. If the aggregate price level is fixed, and government spending increases from Rs.2 trillion to Rs.3 trillion in a year, the total change in GDP as a result of government spending is:
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Keynesian cross and the multiplier has come up 167 times in 7 exams since 2006.
This question is on Government spending and tax multipliers, part of Keynesian cross and the multiplier in Macroeconomics.
The effect on income of changes in government spending, lump-sum taxes, transfers and income taxes.
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Question from the UoH 2012 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.