The increasingly tense political conflict between Australia and China has impacted the traditional trade between the two nations. These include moves by China to impose a new anti-dumping tariff on barley, suspensions of certain beef imports and investigations into cheap Australian wine imports amid a coronavirus-led economic slowdown (South China Morning Post, 29/09/2020).

Assume that Australia is already experiencing recession due to the COVID-19 pandemic, bushfires, and drought. GDP has been dragged down particularly due to weak spending by households (a reduction in consumer confidence) and a significant reduction in investment (a reduction in business confidence).

1) Let's assume that the MPC in Australia is equal to 0.6 (c₁=0.6), the marginal tax rate is 0.3 (t=0.3), and the marginal propensity to import is 0.02 (m=0.02). What would be the impact of a $100m reduction in exports on output? Explain your answer by using the multiplier formula.