Question

Calculate the open economy multiplier if c = 0.5, m = 0.3. Increase in autonomous demand = 200

Answer 1

Multiplier = \(\frac{1}{1 - c + m}\)

= \(\frac{1}{1 - 0.5 + 0.4}\)

= \(\frac{1}{0.8}\) = 1.25

Increase in output = 1.25 x 200 = 250