For the first part of my question: I've calculated my IS (Biens et services = Goods and services) and LM (Monnaie = Money) equations and equilibrium output and interest rate for which I obtained: Y = 290 - 500i as my LM eqn Y= 120 + 1200i as my LM eqn i = 0.1 Y = 240. Up to here my answers are correct. For the second part of my question the following is stated : Suppose the government of this closed economy decides to implement an expansionary fiscal policy to achieve a production level of 360. By how much must public spending be increased to achieve this goal? I proceeded by saying delta Y/ delta G = (360-240)/delta G = fiscal multiplier = 1/1-MPC. From my consumption function I have that c = 0.5. Thus, after calculation my change in G is equal to 60. However, the answer is G changes by 85. Could someone please tell me where I went wrong ?
