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You have estimated a Keynesian model for Ruston as follows:
C = 100+0.9(1-t)YT=tY=0.3YM=0.23(1-t)YI=150G=200X=300
Remember that imports (M) are part of total consumption spending C and that disposable income is (1-t)Y, where t is the tax rate.
a) What is the multiplier effect for Ruston?
b) What happens to Y, T, M, and C if exports increase by 100?
c) Return to the original value for exports. What happens if the propensity to consume out of disposable income falls from 0.9 to 0.8? That is what are the answers to (a) - (c) in this case?
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