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

a) $1 billion
b) $10 billion
c) $100 billion
d) $157 billion

$1.57 billion

Explanation:

Given that,

Government purchases multiplier = 1.57

Increase in government purchases = $1 billion

Change in Real GDP = 1.57 × 1,000,000,000

                                  = $1,570,000,000

                                  = $1.57 billion

Hence, $1 billion increase in government purchases will lead to increase equilibrium real GDP by $1.57 billion.

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a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.