Question

The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by

Answer 1

The answer is 750

Step-by-step explanation:

When government increases its spending, this increase in spending leads to increases in income for households which cumulatively increase the national income, this effect is known as multiplier effect.

Government has increased its spending by 250 while multiplier effect is 3.

Therefore, output will increase by 750(250 x 3)