Assume the economy is closed and there is no government. The aggregate demand components are described below:C = 100 + 0.6Y (1)I = 200 (2)There is a boost in investment making total investment now 300. What would happen if the marginal propensity to consume increases to 0.8? What is the multiplier?

First, let's understand the basic concepts. In this scenario, the economy is closed (no foreign trade) and there is no government, so the aggregate demand (Y) is the sum of consumption (C) and investment (I). The consumption function is given by C = 100 + 0.6Y and the investment is initially 200.

1. The boost in investment from 200 to 300 will increase the aggregate demand. The new aggregate demand (Y') will be the sum of the new consumption and the new investment. Since investment increased, but the consumption function didn't change, the new aggregate demand will be higher than before.

2. If the marginal propensity to consume (MPC) increases to 0.8, the consumption function will change to C = 100 + 0.8Y. This means that for every additional unit of income, consumption will increase by 0.8 units. This will also increase the aggregate demand, because higher consumption leads to higher demand.

3. The multiplier effect refers to the idea that an initial change in spending (like the increase in investment or the increase in consumption due to a higher MPC) can cause a larger change in output. The formula for the multiplier (k) is 1/(1-MPC). So, if the MPC is 0.6, the multiplier is 1/(1-0.6) = 2.5. If the MPC increases to 0.8, the multiplier will be 1/(1-0.8) = 5. This means that the impact of the initial change in spending on the output will be larger when the MPC is higher.