1.Assume the economy is operating under the Classical Theory and we are examining the Bathtub model. How is it that the inflow of water into the tub equal to the outflow for the tub allowing for full employment?

2.Assume there is a nominal rate of interest of 10% in the economy and there is currently a 4% inflation rate. What is the rate that economists use when discussing interest rates associated with inflation and what is that interest rate in this example given the data shown here?

3.Assume that $100 billion is spent by the government for education. If the MPC is 0.8, what is the multiplier? What would be the maximum impact on the economy and would this increase or decrease output? What would the impact be if taxes were raised $100 billion to pay for the expenditure? How and in what direction would this impact output? What would be the impact on output if both the tax increase and expenditure were implemented at the same time?