1. Suppose that the marginal propensity to consume (MPC) is 0.8, and there is a $2,000 increase in autonomous consumption. Given this information, real GDP will increase by;
2. Suppose that the government pursues expansionary fiscal policy by lowering taxes. What are the expected demand-side effects? What are the possible offsets to the demand-side effect? How might supply-side effects change these results?
3. Explain the differences between the public debt and the government budget deficit. Explain how deficit spending could be a burden to future generations.
4. What are the direct and indirect effects of an increase in the money supply?
5. What are the effects of a tariff on a good?