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Suppose the economy is characterized as follows: AE = C + I + G + (X-M) C = 400 + .75(Y - T) - 30

Suppose the economy is characterized as follows:

AE = C + I + G + (X-M)

C = 400 + .75(Y - T) - 30 (r)

I = 500 - 50(r)

G = 400

X- M = -25

T = 80

r = 5

Price level P is fixed at 1 (P=1)

The Consumption function is now C=500 +.75(Y-T) - 30(r). The government spending multiplier in this economy is _______.

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