Suppose that average output per worker equals 50000 and the

Suppose that average output per worker equals $50,000 and the government expenditure multiplier (?Y/?G) is only 0.6. How much additional government spending is required to artificially create a job for one year?

A) $20,000

B) $30,000

C) $5,000

D) $83,333

Solution

We have

Y/G = 0.6

Now we know that output per worker is 50000 that is nothing but Y, so to create a job that means output will have to increase by 50000

so now the equation will be

Y/G = 0.6

50000 / G = 0.6

50000/0.6 = G

G=83,333