Consider the numerical model in section 12.1 for three alternative marginal propensities to import: m = 0.2, m = 0.3 and m = 0.4, all other parameters constant.

(i) Show that the three total expenditure lines emanate from the same point on the vertical axis but that their slopes differ by deriving the equation for each total expenditure curve.

(ii) Obtain the equilibrium income in each case.

(iii) Assuming income begins at Y0 = £2000 million, plot on the same graph the path of income over 10 periods for each marginal propensity.

(iv) What conclusions do you draw from your analysis?