1) Suppose the economy is described by the following: autonomous consumption spending is $1800, the marginal propensity to consume is 0.6, investment spending is $900, government spending is $2000, net exports is $100 and taxes are $1500. What is the equilibrium level of output? What is the multiplier for changes in investment spending? Suppose the government decided to balance the budget by raising taxes to $2000, what would happen? ... If the government cut spending to $1500?

2) Suppose the economy is described by the following: autonomous consumption spending is $40, the marginal propensity to consume is 0.8, investment spending is $70, government spending is $120, net exports is $10 and taxes are $150. What is the equilibrium level of output? What is the multiplier for changes in government spending?