An economy has a consumption function of C= 10 + .8Y, investment of 6, government expenditure of 10, exports of 10, and an import function of M=.1Y
What is the multiplier for this economy?
The marginal propensity to consume is .8, the marginal tax rate is .2, and the marginal propensity to import is .14. The government increase government expenditure and autonomous taxes each by $50 billion. What is the resulting change in equilibrium expenditure?