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Present the mathematical calculation of the multiplier

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Reference no: EM132471873

The extended goods market

C = c0+ c1(YD)                      Consumption function

I = d0+ d1i + d2Y                   Investment function

G = g0  - g1Y                          Governmentexpenditures

T = t0+ t1Y                             Taxes

YD= Y - T                               Disposable income

Z = C + I + G + X - IM         Demand

X = x1Y*                                 Export

IM = m1Y                                Import

a. Present the mathematical calculation of the multiplier. 

b. Which elements in the model increase the strength of the multiplier, and which elements decrease the strength of the multiplier? Explain!

c. Some elements in the model can be labeled as 'automatic stabilizers'. i) Explain what an automatic stabilizer is, and ii) which elements can be labeled as such?

Reference no: EM132471873

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