Determine what is value of the multiplier

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Reference no: EM13231234

Consider the following model of a closed economy (Smallville):

MPC = 0.8 - 0.01Y (marginal propensity to consume)
C = MPC x YD (consumption function)
YD = (Y - T) (disposable income)
I = 500 (investment spending)
G = 1,500 (government spending)
Y = AD (equilibrium condition)
T = 1,200 (taxes - non-income)

What is value of the multiplier?

Reference no: EM13231234

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