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