1. Find the Multiplier. An economy has a marginal propensity to consume (b) of 0.6 and a marginal propensity to import (m) of 0.2. What is the multiplier for government spending for this economy? 2....

1. Find the Multiplier. An economy has a marginal propensity to consume (b) of 0.6 and a marginal propensity to import (m) of 0.2. What is the multiplier for government spending for this economy?

2. The Effects of Taxes and Spending. Suppose the economy has a marginal propensity to consume (b) of 0.6 and a marginal propensity to import (m) of 0.2. The government increases its spending by $2 billion and raises taxes by $1 billion. What happens to equilibrium income?