1) Assume that Investment increases and oil prices increases.What happens toshort-runequilibrium GDP and Price Level?

Explain why Curves shifted and in what direction.

2) When would Fiscal Policy be the most effective at increasing output?Why?List as many examples as you can.

3) What is the formula for Government Savings (S_g)?

4) What effect would we expect an increase in the Government Budget deficit (due to the abovetax cut) to have on the Trade Deficit (can think of as NX)? Why?