Net exports and the spending multiplier suppose that the, Econometrics

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Net exports and the spending multiplier suppose that the

(Net Exports and the Spending Multiplier) Suppose that the marginal propensity to consume (MPC) is 0.8 and the marginal propensity to import (MPM) is 0.05.

a. What is the value of the spending multiplier?

b. By how much would the real GDP demanded change if planned investment increased by $100 billion? c. Using your answer to part (b), calculate the change in net exports caused by the change in aggregate output.

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Econometrics: Net exports and the spending multiplier suppose that the

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