If the Spending Multiplier Equals 5 and Equilibrium Income Is

If the spending multiplier equals 5 and equilibrium income is $2 billion below potential GDP, then _____ to reach the potential real GDP level.

A) total spending needs to increase by $0.1 billion
B) real GDP needs to increase by $1.2 billion
C) total spending needs to decrease by $6 billion
D) real GDP needs to decrease by $12 billion
E) total spending needs to increase by $0.4 billion

Correct Answer:

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