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This is a problem about the multiplier. Let's go a bit beyond PI-LC-H and assume that C/Y=a c +0.5Y. Also, suppose that we estimate thatY=400and

This is a problem about the multiplier. Let's go a bit beyond PI-LC-H and assume that C/Y=a_c+0.5Y.

Also, suppose that we estimate thatY=400and that at the current time R_t = r.

1.Find the multiplier.

2.Now suppose that due to war, exports fall and now bar a = -0.03. Suppose that the real interest rate is unchanged. Find the new level of short-run output (Y tilde) and actual output.

3.how much consumption changed.

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