1. Explain the effect of an increase in imports (= an increase in marginal propensity to import) on the equilibrium GDP in the Keynesian income-expenditure model. Show the new equilibrium and explain the adjustment to the new equilibrium.
2. Carefully explain the effect of a $100 decrease in government transfers (subsidies for education, pensions etc.) on the equilibrium GDP in the Keynesian income- expenditure model. Show the new equilibrium and explain the adjustment to the new equilibrium.
3. Suppose the Central bank of a country issues additional money as cash (additional $100).

a) What will be the total change in money supply if all $100 are held as cash?

b) What will be the total change in money supply if all $100 are deposited in a commercial bank?