3. When businesses in the Macro Islands increased investment by $25 million to attract tourists, aggregate demand increased by $100 million.What is the MPC in the Macro Islands?Show your work.

4. Assume the government wants to decrease the federal deficit and increases taxes by $1 million. The current MPC is .75.Show how this will affect GDP (Your answer should be a dollar amount and you must show how you arrived at your answer.)

5. Assume the government wants to maintain a balanced budget but improve programs for veterans and so they increase taxes by $10 million and also increase government spending by $10 million. The marginal propensity to consume is 0.8. Explain how GDP is impacted as a result. (Your answer should be a dollar amount and you must show how you arrived at your answer.)