As a result of an initial increase in investment of 200 billion, ...

[pragya sharda]

As a result of an initial increase in investment of 200 billion, real GDP increased by 800 billion. Given this information, the expenditure multiplier equals
 
  A) 800 billion. B) 2. C) 1/4. D) 4. E) 6.

Question 2

Suppose that the money prices of raw materials increase so that short-run aggregate supply decreases. If the Federal Reserve does not respond, the higher money price of raw materials will
 
  i. repeatedly shift the aggregate demand curve rightward and raise the price level.
  ii. shift the aggregate demand curve rightward and the aggregate supply curve leftward, raising prices.
  iii. result initially in lower employment and a higher price level.
  A) i only
  B) both i and ii
  C) iii only
  D) both ii and iii
  E) i and iii

[ynlevi]

Answer to Question 1

D

Answer to Question 2

C