I. SOLVE: attach solutions

Given: MPS = 0.20, Go = Php 300 B, G1 = Php 400 B, To = Php 300 B, T1= Php 400 B, where MPS represents the marginal propensity to save, Go is the original government spending, G1 is the new government spending, To is the original level of lump-sum tax, T1 is the new level of lump-sum tax.

1. Find the government spending multiplier 2. Find the lump-sum tax multiplier 3. Find the change in equilibrium level of income due to the change in government spending 4. Find the change in equilibrium level of income due to the change in lump-sum tax 5. Given the simultaneous and equal change in government spending and lump-sum tax, how much is the net change in equilibrium level of income ?

II. Explain accurately:

1. If Ernie has met his transaction demand and precautionary demand for money, and still has excess cash. He does not want to hold this extra cash and wants to buy bonds. Discuss how the price of bonds will be affected, what will happen to the interest rate, what will happen to investment, what will happen to the national equilibrium level of income?

2. A certain Russel Manosa was paid by the factory owner Jasper Cheng So with 5 centavo and 1 centavo coins equivalent to Manosa's 2 days of work worth P1,056. Based on the regulations of the Bangko Sentral ng Pilipinas, there is a limit to the amount of coins that can be considered as legal tender. Mayor Rex Gatchalian called both parties to a meeting. Mayor Gatchalian said that Manosa was considered underpaid. What is your opinion on the matter?