Comprehension Passage
Direction: Read the passage given below and answer the questions that follow it:
Suppose that for a particular economy for some time period, investment was equal to 100, government expenditure was equal to 75, net taxes were fixed at 100 and consumption (C) was given by the consumption function:
C = 25 + 0.8 YD
where YD is disposable income and Y is GDP.
What is the value of the government expenditure multiplier \(\rm\left(\frac{\Delta Y}{\Delta G}\right)\)?
1
5
2
4
3
6
4
3