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Suppose that a hypothetical economy is categorized by the following model:
C = 800 + 0.6DII = 500G = 75T = 180X = 25IM = 15
where C represents consumption, DI represents disposable income, I represents investment, G represents government purchases, T represents net taxes, Y represents real GDP, X represents exports, and IM represents imports.
The oversimplified multiplier formula tells us the change in equilibrium GDP with respect to a one-unit change in any component of spending.
What is the value of the oversimplified multiplier formula in this case?
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