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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=ac+0.5Y.
Also, suppose that we estimate thatY=400and that at the current time Rt = 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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