The Short-Run Multiplier Is Equal to 3, Real GDP Equals

Multiple Choice

The short-run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price level is equal to 100. Suppose that government expenditure decreases by $200. The long-run effect of the decrease in government expenditure changes real GDP by

A) a decrease of 600.
B) an increase of 600.
C) nothing; that is, in the long run real GDP equals $8,000.
D) a decrease of $200 because in the long-run, the multiplier is 1.