Introductory Macroeconomic

a) Draw and label the Keynesian Cross (45 degree) diagram in a closed, ungoverned economy (the two sector model).
b) How does the diagram change when we move to an open, governed economy (the four sector, or real world model)?
c) Use the real world diagram to illustrate the impact on an economy of an decrease in the level of exports.

d) (Please, Using the formula of Multiplier), estimate the value of the real world multiplier in an economy with a marginal propensity to consume of 0.7, a marginal propensity to import of 0.2 and a marginal tax rate of 0.3. Identify the predicted total impact on GDP of a $20bn decrease in exports (assuming no other changes in autonomous spending).
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