Answer to Question #319928 in Macroeconomics for tani

Question

1. What is the government expenditure multiplier? (assume that all expenditure in made on domestically produced goods)

Assume that full employment is achieved at a level of national income of $200 billion

Answer 1

The impact of a change in income following a change in government spending is called government expenditure multiplier, symbolised by k_G. In other words, an autonomous increase in government spending generates a multiple expansion of income.