If investment increases by $0.5 trillion, calculate the change in equilibrium expenditure and the multiplier. In an

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If investment increases by $0.5 trillion, calculate the change in equilibrium expenditure and the multiplier.


In an economy with no exports and no imports, autonomous consumption is $1 trillion, the marginal propensity to consume is 0.8, investment is $5 trillion, and government expenditure on goods and services is $4 trillion. Taxes are $4 trillion and do not vary with real GDP.

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Foundations of Macroeconomics

ISBN: 978-0134492001

8th edition

Authors: Robin Bade, Michael Parkin

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