Question: This is a problem about the multiplier. Let's go a bit beyond PI-LC-H and assume that C//Y = aC + 1/3Y Also, suppose that we

This is a problem about the multiplier. Let's go a bit beyond PI-LC-H and assume thatC//Y = aC + 1/3Y

Also, suppose that we estimate thatY bat = 1500 and that at the current timeRt= r bar.

(a) Find the multiplier.

(b) 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.

(d) Now suppose that the government implements a fiscal stimulus policy of additional government spending of 2% of potential GDP. Suppose that the export disruption continues. Find the new level of short-run output, actual output and consumption.

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