1) Suppose the economy is in a recession. The economy needs to expand by at least $400billion, and the marginal propensity to consume is 0.9. What is the least amount the government can spend to overcome the $400billion gap?

2) Imagine a world where there are only two countries. In country A, the people spend 80% of their marginal income. In country B, the people spend 60% of their marginal income. In which country would fiscal policy be more effective and why? Fiscal policy will be more effective in ___because the multiplier will be____.

3) Assume there is a recessionary gap of $200 billion, and that the government has decided to engage in expansionary fiscal policy to eliminate this recessionary gap. How much must the government spend to get the economy to the long-run equilibrium if the marginal propensity to consume is 0.5?