eco 201 questions 3

1. Explain the effects of the following actions on equilibrium income, assuming that the marginal propensity to consume is 0.7

a. Government purchases rise by $60 billion. (show working)

b. Taxes fall by $60 billion. (show your work)

2. Explain how fiscal policy can be used to close the (a) contractionary gap and (b) inflationary gap.

3. Discuss some of the challenges associated with expansionary fiscal policy (not less than 300 words).

4. How serious is the national debt to our economic stability? (not less than 300 words).

5.Is America obligated to help poor countries? Is foreign aid worsening the U.S budget deficit?(not less than 350 words).