Makes increase in real gdp via multiplier process

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Increase in Government expenditure makes increase in real GDP via multiplier process. If the effective multiplier for fiscal policy is 2, how much change in government purchases would be required to close a 500 billion negative output gap, other things being equal?

A. there should be a decrease in G by $500 billion

B. increase G by $250 billion

C. there should be an increase in G by $500 billion

D. there should be an increase in G by $200 billion

Reference no: EM13836927

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