Question 1: Suppose that the economy starts at equilibrium and the mpc = 0.8. What would be the effect of a 500 increase in taxes once all the rounds of the multiplier process are complete?
Question 2: Assume the government cuts its purchases by $150 billion. As a result, the budget deficit is reduced by $40 billion, private domestic saving decreases by $10 billion, disposable personal income decreases by $80 billion and the trade deficit is reduced by $15 billion. By how much has national income (Y) changed?
Question 3: Compute the GDP using the data in the table
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Government Purchases
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15
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Consumption
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90
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Gross Investment
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20
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|
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Consumption of Fixed Capital
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5
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|
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Exports
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8
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|
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Imports
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12
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Question 4: Using demand and supply analysis to assist you, what are the effects on the exchange rate between the British pound and the Japanese yen from: a decrease in Japanese interest rates (Please respond by stating which currency will appreciate and which one will depreciate. That is all that is required)