1.-If-saving-dropped-sharply-in-the-economy,-what-would-likely-happen-to

investment?-Why?

2.-Suppose-local-governments-throughout-the-United-States-increase-their

tax-on-business-inventories.-What-would-you-expect-to-happen-to-U.S.

investment?-Why?

3.-Suppose-the-government-announces-it-will-pay-for-half-of-any-new

investment-undertaken-by-firms.-How-will-this-affect-the-investment

demand-curve?

4.-Suppose-real-GDP-in-an-economy-equals-its-potential-output-of

$2,000 billion,-the-multiplier-is 2.5,-investment-is-raised-by $200

billion,-and-the-increased-investment-does-not-affect-the

economy's-potential.

a.-Show-the-short--and-long-run-effects-of-the-change-upon-real

GDP-and-the-price-level,-using-the-graphical-framework-for

the-model-of-aggregate-demand-and-aggregate-supply.

b.-Would-real-GDP-rise-by-the-multiplier-times-the-change-in

investment-in-the-short-run?-In-the-long-run?-Explain.