Since March 2020 (after the breakdown of Covid19) it is observed that people started to

save more and consume less. The new statistics suggest that the marginal propensity to

save increased to 0.4 from 0.25.

(a) Find and interpret the new government spending multiplier?

(b) Government initiated a project to construct a bridge from its own financing. Upon

completion, it will help to increase economic activities. The total budget of the project

is Tk. 2,700 crores. If the above statement stands true, what is the potential equilibrium

income/output loss due to COVID - only for this project.