Investment and net exports do not change

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Reference no: EM131102208

The consumption function is C = 0.75Y where the marginal propensity to consume MPC equals .75 (out of an additional $1 in national income 75 cents is consumed). The government increases its purchases by $100 million, and investment and net exports do not change. Give:

(a) The Keynesian multiplier.

(b) Total increase in Y.

Reference no: EM131102208

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