Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declinesby $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to by .

Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to by at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is known as the effect.