1. Consider the imaginary small country of Kootenay. Assume that Kootenay is closed to trade, so
that its net exports are equal to zero. Suppose that th economy is described by the following
consumption function, where C is consumption, Y is income (real GDP), IP is planned
investment, G is government purchases, and T is taxes: C=$15billion+0.75(YT) Suppose G=$90
billion, IP=$60 billion, and T=$20 billion. Given the consumption function and the fact that, in a
closed economy, planned expenditure can be calculated as Y=C+IP+G, the equilibrium income
level is billion. Suppose that government purchases are increased by $50 billion. The new
equilibrium level of income will be equal to billion. Based on the effect of the change in
government purchases on equilibrium income, you can tell that this economy's multiplier is equal
to