Show your workings for each of the following.

a. An economy has a marginal propensity to consume of 0.8. Calulate:

i. Its marginal propensity to withdraw

ii. Its multiplier

iii. The amount of injections that would be needed if national income is to rise by $10 million.

b. In a country, the marginal propensity to save is 0.1, the marginal rate of tax is 0.3, and the marginal propensity to import is 0.1 How will the value of the multiplier change if the government lowers taxes, such that the marginal rate of tax drops to 0.2?