Question 16 marks
Not finished
A small open economy receives a $2 billion rise in private investment. Economists estimate its marginal leakages.
| Marginal leakage | Value |
|---|---|
| Saving | 0.18 |
| Tax | 0.12 |
| Imports | 0.20 |
Calculate the simple open-economy multiplier and the predicted final rise in national income. Explain why the final rise exceeds the initial investment. [6]