Question: 5. (More difficult) Keep everything the same as in Test Yourself Question 4 except change investment to I = $1,100. Use the equilibrium condition Y

5. (More difficult) Keep everything the same as in Test Yourself Question 4 except change investment to I =

$1,100. Use the equilibrium condition Y = C + I + G + (X

– IM) to find the equilibrium level of GDP on the demand side. (In working out the answer, assume the price level is fixed.) Compare your answer to Table 3 and Figure 10.

Now compare your answer to the answer to Test Yourself Question 4. What do you learn about the multiplier?

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