The economy is in a long-run equilibrium. The marginal propensity to consume is 0.8. In an effort to balance the budget, Congress passes a new law that would increase taxes by $100 million a year.

1. According to the Keynesian cross model, what is the predicted impact on GDP?Give a numeric answer in the text box below. Then, draw a graph on paper to illustrate your answer. (2 points)
2. In the IS-LM model, what is the predicted impact of this policy on output and the interest rate? write answer into the text box. Draw a graph on paper to illustrate your answer. (2 points)
3. Are the predicted quantitative changes in GDP in part 1 and 2 the same? If yes, answer yes. If not, explain why they are not the same. write answers into the text box. (2 points)
4. Predict what happens to GDP and interest rate in the long-run using the IS-LM model. write answer into the text box. Modify the graph in part b. on paper to support your answer. (2 points)