Question

lumn of the table.

Real GDP (Y)	Aggregate Expenditures
(Trillions of dollars per year)	G=$1 trillion	G=$1.50 trillion
	(Trillions of dollars per year)	(Trillions of dollars per year)
0	1.25
1	2.00
2	2.75
3	3.50
4	4.25
5	5.00
6	5.75
7	6.50
8	7.25
9	8.00
10	8.75

The increase in government spending from G=$1 trillion to G=$1.50 trillion results in shift of the AE curve, causing in equilibrium real GDP that is than the change in government spending. This $1.50 trillion increase in government spending results in a real GDP increase of trillion. Therefore, the value of the spending multiplier is .

Answer 1

Real GDP(Y)(Trillions of dollars per year)	Aggregate Expenditures(Trillions of dollars per year)
	G = $1 trillion	G = $1.50 trillion
0	1.25	1.75
1	2.00	2.50
2	2.75	3.25
3	3.50	4.00
4	4.25	4.75
5	5.00	5.50
6	5.75	6.25
7	6.50	7.00
8	7.25	7.75
9	8.00	8.50
10	8.75	9.25

The increase in government spending from G=$1 trillion to G=$1.50 trillion results in upward shift of the AE curve, causing in equilibrium real GDP that is more than the change in government spending. This $1.50 trillion increase in government spending results in a real GDP increase of $2 trillion. Therefore, the value of the spending multiplier is 4.

Multiplier = change in real GDP / Change in G = (7 - 5) / (1.50 - 1) = 4.