Consider the following open economy. The real exchange rate is fixed and equal to

one. Consumption, investment, government spending, and taxes are given by:

C = 10 + 0.8 (Y T)

I = 10

G = 10

T = 10

Imports and exports are given by:

Q = 0.3 Y X = 0.3 Y*

where an asterisk denotes a foreign variable.

b) Assume the foreign economy has the same equations as the domestic economy

(remove the asterisk from all the variables with an asterisk and add a

n asterisk to all the

variables without an asterisk). Use the two sets of equations to solve for the equilibrium

income of each country.

Y = 44 + 0.6Y*

and

Y* = 44 +0.6Y

they say to calculate the new multiplier

The answer says the multiplier is calculated as: [1/(1-0.8-0.3*0.6 +0.3)]=3.125 WHY and How did they get here?