1.Assume that Carl and Wanda each make $40,000. Each was given a raise of $4,000. Carl’s spending increased from $40,000 to $43,000. Wanda’s savings increased from $1,000 to $2,000.

i. Carl lives in the Macro Islands. What is Carl’s MPC?

ii. Wanda lives in the Micro Islands. What is Wanda’s MPS?

2.When businesses in the Macro Islands increased investment by $30 million to attract tourists, GDP increased by $300 million. Calculate the MPC in the Macro Islands?

3.Assume taxes increase by $300 and government spending increases by $300. The marginal propensity to consume is 0.75. Calculate the total change GDP.

4.If equilibrium output rises by a total of $400 billion in response to an increase in government spending of $80 billion, what is the marginal propensity to consume?

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