Problem
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 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.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.