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?