Section B. Evaluate the following statements as true/false/uncertain and explain your an- swer carefully. Each answer should be approximately one page long. Please use diagrams and/or algebra when answering the question, when appropriate. Each statement is worth 5 marks (Total: 15 marks). 1. If the trade surplus is fixed, and private savings is fixed, then any increase in actual investment will reduce the primary government budget deficit. (5 marks) 2. In the Keynesian cross model explained in the lecture, the paradox of thrift implies that any change in autonomous savings will be neutralised in equilibrium, leaving equi- librium savings and consumption unchanged. (5 marks) 3. An increase in money demand (shifting the money demand function) will reduce the equilibrium amount of investment, according to the IS-LM model, but will have no effect on investment, according to the classical model