(solution) Calculate the effect of a one-dollar increase in investment on output for each of the following…

(solution) Calculate the effect of a one-dollar increase in investment on output for each of the following…

Calculate the effect of a one-dollar increase in investment on output for each of the following economies: (a) A simple consumption and investment economy where the MPC is .9 (b) An economy with government but no foreign trade, where the MPC is .9 and the tax rate is .3 (c) An economy with an MPC of .9, a tax rate of .3, and a marginal propensity to import of .1