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A) Assume the MPC =0.80 and there are no taxes or imports.
a. What does the multiplier equal?
If the initial equilibrium aggregate expenditure is $500 million, what will be the effect on aggregate expenditure of $10 million increase in investment?
B. Consider the following numeral version of the Keynesian model of an open economy with government.
C= 200+0.75Yd
I=250
G=250
T=200
i) using the equilibrium condition Y=C+I+G, solve for the value of the equilibrium output.Yd id defined s Y-T
C. What is the marginal propensity to consume? why it is an important concept?
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