Assume That the Multiplier Effect for Mexico Is 0

Assume that the multiplier effect for Mexico is 0.85 for an increase in spending by the U.S. government by $1. Therefore, a $20 billion decrease in spending by the U.S. government results in:

A) a $23.5 billion increase in Mexican real GDP.
B) a $133.3 billion decrease in Mexican real GDP.
C) a $3 billion decrease in Mexican real GDP.
D) a $17 billion decrease in Mexican real GDP.
E) a $23.5 billion decrease in Mexican real GDP.

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