1. Consider an economy with the following characteristics:

Consumption function is C = 100 + 0.8YD;

Planned investment:I = 50;

Government expenditure:G = 60;

The tax function: T = 0.3Y;

Exports of the country: X = 20

The import function: M = 10 + 0.06Y.

Assume there are no transfer payments and no autonomous taxes.

All variables are in billions of dollars. C is consumption expenditure; Y_D is disposable income; Y is real GDP; G is government purchases of goods and services; T is taxes; I is planned investment expenditure; X is exports, and M is imports.

a. What is the value of consumption expenditure of the economy?

b.Define the concept of multiplier.Calculate the size of the multiplier of the economy if government expenditure rises from $60 billion to $100 billion. Does the open economy multiplier is bigger than closed economy multiplier?

2. Gross fixed capital formation (GFCF) (investment) one of the most volatile components of GDP. In a diagram, show the movement of private and public GFCF of Australia over 2005 and 2024