1) Assume Americans currently import more than they export. Illustrate the effect of foreign- ers becoming more optimistic about their future incomes. What happens to the quantity of Americans’ net imports? What happens to American consumption?
2) Assume Americans currently export more than they import. Illustrate the effect of foreign- ers becoming more optimistic about their future incomes. What happens to the quantity of Americans’ next exports? What happens to American consumption?
3) Suppose the government confiscates and burns exactly half of everyone’s money. Illustrate the effect of this in a supply and demand diagram. Does the price level rise or fall?