Answer:
D. $157 billion
Explanation:
Here is the correct question: In preparing their estimates of the stimulus package's effect on GDP, Obama administration economists estimated a government purchases multiplier of 1.57. This indicates that a $1 billion increase in government purchases would increase equilibrium real GDP by.
Given: Govemment purchase multiplier= 1.57
Amount of increase in government purchase= $1 billion.
Now, finding the change in real GDP.
Formula; Change in real GDP= [tex]multiplier\times change\ in\ governement\ purchase[/tex]
Change in real GDP= [tex]1.57\times \$ 1\ billion[/tex]
⇒ Change in real GDP= [tex]1.57\times 1000000000[/tex]
∴ Change in real GDP= [tex]\$ 1.57\ billion[/tex]
Hence, Governement purchase of $1 billion would increase equilibrium real GDP by $1.57 billion.
