The GDP of a country will change by $817.5 billion after a $545 billion increase in government purchases if the multiplier is 1.5.
Gains in total output are greater than the shift in spending that created them in terms of the gross domestic product (GDP), thanks to the multiplier effect. The correlation between government spending and the gross domestic product is commonly referred to as a multiplier.
The deposit multiplier, a term used to describe fractional reserve banking, is another example of a multiplier in operation. There are several instances where multipliers are used, such as when trading on margin or when money is multiplied in fractional reserve banking.
The different categories of multipliers include:
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