1) Kari received a raise in salary from $72,000/yr to $77,000/yr. Her savings increased from $21,000 to $23,000 per year. Calculate her MPC. Show your work.

2) If real GDP decreased by $10 billion and the spending multiplier is 2.5, find the change in household consumption. Show your work.

3) Draw a fully labeled AD-AS Model in AD, SRAS, & LRAS equilibrium. Illustrate the outcome in the following scenario: A cut in Federal spending for Health Care

Draw a fully labeled AD-AS Model in AD, SRAS, & LRAS equilibrium. Illustrate the outcome in the following scenario: A severe recession in a country that imports a great deal of US products

4) Draw a fully labeled AD-AS Model to Illustrate the long-run self-adjustment to scenario 3b above.

5) Real GDP is $14 trillion with a potential real GDP of $14.5 trillion. The Federal government wants to close that gap through spending. The marginal propensity to save is 0.5. What should the government do? Show your work.