Equilibrium income is where AD equals AS, or Y = C + I. With MPC of 0.8, the multiplier is 1/(1–0.8) = 5. But, bhai, these equations assume a closed economy, while my own life is an open economy leaking imports. My MPC on farm goods is 1, but my son’s MPC on Canadian application fees is also 1, so the multiplier works, but all the income multiplies right out of Gujarat.
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