Multiplier effect on equilibrium output in aggregate expenditure model
Use the following information on the variables in the open economy aggregate expenditure model:
Autonomous Consumption C0= 200
Autonomous Investment I0= 200
Government Spending G0=100
Export Spending X0 =100
Autonomous Import spending M0= 100
Taxes T0=0
Marginal propensity to consume c1= 0.8
Marginal propensity to invest i1= 0.1
Marginal propensity to import m1= 0.15
A- Compute the equilibrium level of income
B- If Government spending increases from 100 to 300, Compute the new equilibrium
C- Compute the value of the multiplier.