View the step-by-step solution to:


If the effective multiplier for fiscal policy is 2, how much change in government purchases would be required to

close a 500 billion negative output gap, other things being equal?

a. A 250 billion increase

b. A 1 Trillion increase

c. A 1 trillion decrease

d. A 250 billion decrease

Top Answer

The correct option is: b. A 1 Trillion increase multiplier=2 2 x 500= 1trillion A... View the full answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question