1.As the marginal propensity to spend increases, analysts will observe that:

1. the level of autonomous spending increases
2. the value of the multiplier increases
3. the effect of fiscal policy on GDP declines
4. the reserve requirement declines

2.According to Keynesians, when the economy experiences a decline in spending:

1. the government should increase spending or lower taxes to restore aggregate demand
2. increases in unemployment can be avoided by eliminating the minimum wage and lessening the power of unions
3. an increase in taxes in order to balance the budget is a useful way to help prevent a recession
4. prices will decline, causing consumers to purchase any excess supplies of goods and services

3.Assume a national economy is in the Keynesian range of its aggregate supply curve (i.e. the price level is constant) and its aggregate expenditure function is estimated as AE = 2000 + .6Y.

This economy's equilibrium level of GDP is:

1. 2000
2. 5000
3. 1200
4. 3333