1. Explain the effect of an increase in imports (= an increase in marginal propensity to import) on the equilibrium GDP in the Keynesian income-expenditure model.

In your answer, carefully show the new equilibrium and explain the adjustment to the new equilibrium.

2. Carefully explain the effect of a $100 decrease in government transfers (subsidies for education, pensions etc.) on the equilibrium GDP in the Keynesian income- expenditure model.

In your answer, carefully show the new equilibrium and explain the adjustment to the new equilibrium.

3. Suppose the Central bank of a country issues additional money as cash (additional $100).

under question 3 What will be the total change in money supply if all $100 are held as cash?

under question 3 What will be the total change in money supply if all $100 are deposited in a commercial bank?