1. Consider an economy where the government reduces its spending by $6000. If the average citizen saves 20% of each additional dollar of income they earn, calculate the total change in Y that results.

(Carefully follow all numeric directions; round intermediate steps to four decimal places and your final answer to two. Use a positive number to indicate an increase in Y and a negative number (with negative sign) to indicate a decrease.)

2. Consider an economy that is fighting inflation. The government decides to change taxes to help pursue this goal.

This is called [ Select ] ["tight (contractionary) monetary", "easy (expansionary) fiscal", "easy (expansionary) monetary", "tight (contractionary) fiscal"] policy; it will be done by [ Select ] ["raising taxes to decrease aggregate demand", "raising taxes to raise aggregate demand", "decreasing taxes to decrease aggregate demand", "decreasing taxes to raise aggregate demand"] .

We'll use this information in the next question.

3. Consider again the situation from the last question. Let's assume the change in taxes is in the amount of $1500, and the average citizen spends 75% of each additional dollar of income. Calculate the total change in Y that results.

(Carefully follow all numeric directions; round intermediate steps to four decimal places and your final answer to two. Use a positive number to indicate an increase in Y and a negative number (with negative sign) to indicate a decrease.)

Answer rating: 100% (QA)

1 MPS 20 02 K 1 MPS K 102 K 5 K YG 5 Y6000 Cross multiply Y 6000 x 5 Y ... View the full answer