automatic stabilizer 218 Test Yourself Fiscal policy 203 1. Consider an economy in which tax collections are always $400 and in which the four components of aggregate demand are as follows: income,an like the fo GDP Taxes DI C 1 G (X- IM) $1,360 $400 $960 $720 $200 $500 $30 1,480 400 1,080 810 200 500 30 1,600 400 1,200 900 200 500 80 1,720 400 1,320 990 200 500 30 1,840 400 1,440 1,080 200 500 30 Fir is Find the equilibrium of this economy graphically. What m is the marginal propensity to consume? What is the if multiplier? What would happen to equilibrium GDP P if government purchases were reduced by $60 and the 3. R price level remained unchanged? 2. Consider an economy similar to that in the preceding question in which investment is also $200, government purchases are also $500, net exports are also $30, and the price level is also fixed. But taxes now vary with