Consider a Keynesian economy with no taxes and no international trade. • The economy initially has a real GDP of $500. • Andy increases his consumption by $70 because of an increase in his wealth. He...

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Extracted text: Consider a Keynesian economy with no taxes and no international trade. • The economy initially has a real GDP of $500. • Andy increases his consumption by $70 because of an increase in his wealth. He spends it on a lunch from Bernard's truck. Bernard saves a fraction of this extra disposable income, and uses the remainder to buy earrings from Chanel. • Bernard's marginal propensity to consume is 0.8. • Chanel's marginal propensity to consume is 0. What is the domestic real GDP at the end of these transactions? (Hint: real GDP must equal income, both of which must equal expenditure.) Do not enter the $ sign. Round to two decimal places if required. Answer: