Suppose the multiplier is 2.5 and initially real GDP equals potential GDP. If investment increases by $20 billion, how will equilibrium real GDP change in the long run?

Question

Accepted Answer

It does not change.

Answer

It increases by more than $50 billion.

Answer

It decreases by less than $50 billion.

Answer

It increases by $50 billion.

Answer

It increases by a positive amount but less than $50 billion.

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Suppose the multiplier is 2.5 and initially real GDP equals potential GDP. If in...

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