Problem 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?
Problem 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?
Problem 3: Compute the GDP using the data in the table
|
Government Purchases
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15
|
|
Consumption
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90
|
|
Gross Investment
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20
|
|
Consumption of Fixed Capital
|
5
|
|
Exports
|
8
|
|
Imports
|
12
|
Problem 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)