Suppose a private closed economy has an MPC of 0.8 and a current equilibrium GDP of $10 billion.

1.What is the multiplier in this economy?

2.Now suppose the economy opens up trade with the rest of the world and experiences net exports of $10 billion. What impact will this have on the equilibrium real GDP?

3.Next, suppose a government is introduced and plans to spend $50 billion. By how much will this change in spending ultimately cause GDP to change, and in what direction?