The reduced form of a simple macroeconomic model is given by Y = b+I*+G*/1-a where a =0.8, b =60, 1 *=600, G * = 300 and the parameter, a, denotes the marginal propensity to consume. ΟΥ
a) Find the value of the marginal propensity to consume multiplier, ∂Y/∂a =
b) Hence estimate the change in the value of the marginal propensity to consume needed to increase Y by 60 units. (round answer to four decimal places)
