4. Suppose a country's debt rises by 10% and its GDP rises by 12%.

a. What happens to the debt-GDP ratio? b. Does the relative level of the initial values affect your answer?

7. Suppose a country decreases government purchases by $100 billion. Suppose the multiplier is 1.5 and the economy's real GDP is $5,000 billion.

a. In which direction will the aggregate demand curve shift and by how much?

b. Explain using a graph why the change in real GDP is likely to be smaller than the shift in the aggregate demand curve.

9. Suppose a country increases income taxes by $100 billion, and this leads to a decrease in consumption spending of $90 billion. Suppose the multiplier is 1.5 and the economy's real GDP is $5,000 billion.

a. In which direction will the aggregate demand curve shift and by how much?

b. Explain using a graph why the change in real GDP is likely to be smaller than the shift in the aggregate demand curve.