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Value of the multiplier

12. During one period in history, business investment spending dropped and our trade deficit got larger (imports were bigger than exports.) A reason this did not lead to a drop in GDP could have been:
A) consumer spending increased
B) government deficits declined
C) imports dropped relative to exports
D) exports dropped relative to imports
E) our exchange rate improved

19. Assume the MPE is .75. If the government raises spending by $100 Billion the equilibrium level of GDP should (assuming Keynesian economics):
A) fall by $ 300 billion
B) rise by $ 300 billion
C) fall by $ 400 billion
D) rise by $ 400 billion

20. In a period of high unemployment the Fed. would probably:
A) raise the fed funds rate
B) raise the discount rate
C) raise the required reserve ratio
D) buy bonds through open market operations
E) increase government spending and cut taxes

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12 During one period in history, business investment spending dropped and our trade deficit got larger (imports were bigger than exports.) A reason this did not lead to a drop in GDP could have been:

A) consumer spending increased
(Which has make up the decline in ...

Solution Summary

Value of the multiplier is determined.

$2.19