Question 1
If the government spending multiplier is 5 and government spending decreases by $200 billion, output will ________ by $________ billion.
◦ increase; 200
◦ decrease; 1,000
◦ decrease; 40
◦ decrease; 200
Question 2
The economy of Bananaland can be characterized by Equation 24.5.
EQUATION 24.5:
C = 2,000 + 0.75
Yd
T = 200
G = 400
I = 500
Refer to Equation 24.5. The equilibrium level of income in Bananaland is
◦ 4,800.
◦ 5,600.
◦ 10,000.
◦ 11,000.