1 A. Assume the following economy: Autonomous Consumption = 3 mils; Marginal Propensity to Consume = 0.8; Business Investment = 52; Government spending = 127 mils income tax rate = 40%.

(a) Find the equilibrium size of income Y.

(b) Identify whether the government runs a budget deficit or a budget surplus.

1 B. An increase in expected inflation will shift

a.both the short-run and the long-run Phillips curves to the right.

b.only the short-run Phillips curve to the right.

c.only the long-run Phillips curve to the right.

d.the short-run Phillips curve to the right and increase the slope of the long-run Phillips curve.

1 C. An increase in worker productivity brought about by the introduction of new technology into the workplace will

a.shift the long-run Phillips curve to the left.

b.shift the long-run Phillips curve to the right.

c.decrease aggregate demand, since workers will lose their jobs.

d.cause the aggregate demand curve to become horizontal.