Explain the impact of a 200 million pound increase in government expenditure on national income in the following three cases. In your calculations use the following data where appropriate; the marginal propensity to consume is 0.6; the income tax rate is 50 per cent of all income and the marginal propensity to import is 0.2

(a) a closed economy multiplier with no income taxes. [2 marks]

(b) a closed economy multiplier with government income taxes. [4 marks]

(c) an open economy multiplier with no government taxes. [4 marks]

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