Question: Please help me to answer this MCQs QUESTION 1 In the classical model, the government raises lump-sum taxes on income by $100 billion, and the
Please help me to answer this MCQs



QUESTION 1 In the classical model, the government raises lump-sum taxes on income by $100 billion, and the economy adjusts so that output does not change. If the marginal propensity to consume is (16, national saving: "'5 4* rises by $100 billion. "7 E'- rises by $60 billion. "7 C- falls by $50 billion. '1" D-falls by $100 billion. QUESTION 2 In the classical model, assume that equilibrium GDP (Y) is 6,000. Consumption {C} is given by the equation C = 500 + t].?5{ir' T}. Taxes {T} are equal to 300. Government spending is 600. In this case, equilibrium investment is: "7 'L 500. "7 E1-1,000. "7 c- 1,500. "7 D2.200. 1 ________ _ 'n1e economy begins in long-run equilibrium at Point E, representing the real interest rate, (1, at which saving, S1, equals desired intrestrltentr :1. What will be the new.r long-run equilibrium combination of real interest rater saving, and investment if the government outs taxes, holding other factors constant? '7 \" Point A '7 \" Point B "7 c- Point c '7 3- Point D
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