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Calculate the simple multiplier

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Reference no: EM131557599

Suppose the economy of A has the following features: Fixed price level No foreign trade Autonomous desired investment (I) = $20 billion Government purchases (G) = $30 billion Desired consumption (C) = $ 15 billion The marginal propensity to consume from disposable income = 0.75 Net tax rate = 0.20

1. What is the equation for AE FUNCTION?

2. What is the marginal propensity to spend out of national income?

3. Calculate the simple multiplier?

Reference no: EM131557599

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