(a)What are the management challenges of an open economy? Illustrate your answer with examples using any one open economy.

(b)In an economy in which the marginal propensity to consume equals 0.9, the introduction of 10 units of the government expenditure, by how much will equilibrium income change?

(c)What are the assumptions, if any, you have made to answer part (b) of the question?

(d)What will be the change to equilibrium income if the government introduced a tax rather than increase expenditure by 10 units?