I believe that the $500 cheque from your parents has already been counted when it was earned and therefore would neither increase or decrease GDP. GDP is defined basically as a bulk measure of production that is equal to the sum of all gross values of all units involved in production.
Answer
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Step-by-step explanation:
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Based on the fact that the increase in investment led to such an increase in equilibrium expenditure, then the expenditure multiplier can be found to be E. $40 billion ÷ $10 billion = 4.
<h3>How to find the expenditure multiplier?</h3>
The expenditure multiplier shows how much expenditure will increase by, as a result of an increase in investment or other factors that bring about a cash injection into the economy.
The expenditure multiplier in this case, can be found by the formula:
= Equilibrium expenditure / Increase in investment
Solving for the Expenditure multiplier gives:
= 40 billion / 10 billion
= 4
Options for this question include:
- A. $10 billion $40 billion = - $30 billion.
- B. $40 billion $10 billion = $30 billion.
- C. $10 billion x $40 billion = $400 billion.
- D. $10 billion ÷ $40 billion = 0.25.
- E. $40 billion ÷ $10 billion = 4
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