Problem 1 (29 points) a) Suppose that, in the U.S., households save $.10 of each dollar they

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Problem 1 (29 points) a) Suppose that, in the U.S., households save $.10 of each dollar they earn and spend $.90 of each dollar they earn. What is the simple spending multiplier that results from this information that we use to calculate the impact of fiscal policy? Focusing on the Keynesian view, if the government increases purchases by $5 billion, how does that change the quantity (in dollars) of output demanded? (7 points)

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Problem 1 (29 points) a) Suppose that, in the U.S., households save $.10 of each dollar they

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