1.

Consider an increase in investment spending of $1 trillion due to a decrease in interest rates. a. According to the GDP multiplier effect, what would be the predicted final change to GDP if the MPC = .8? b. According to the GDP multiplier effect, what would be the predicted final change to GDP if the MPC = .2? c. Explain why different values of the MPC yield different final changes to GDP.As part of its response to the COVE-19 impact on the US economy, the Federal Reserve sharply decreased the federal funds rate in March of 31020 om 135% to 43.25%. a. What stage of the business cycle recession or expansion was expected to follow om the COR-1D- 19 crisis in early2020? What changes to employment and ination would have been worrisome to the Federal Reserve? h. List the steps in the monetary policy transmission mechanism that were expected to follow om the lower federal funds rate. c. In general, do you think that aggregate spending-"demand would be sensitive to changes in interest rates during a recession? Why or why not? 1Would the policy from part 3: he more or less eect'e as a result\"? d. In general, do you think that the average marginal propensity to consume is high or low during a recession? Why or why not? Would the policy om part E: be more or less effective as a result