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(5 points) Suppose the government raises both taxes and spending by $250 billion. a. Assuming the marginal propensity to consume is 0.8 , what happens to the following? (Do they rise or fall? By what amount?) i. Public Savings ii. Private Savings iii. National Savings iv. Investment b. How do your answers to the above change if the marginal propensity to consume is 0.95 ? .

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(5 points) Suppose the government raises both taxes and spending by $250 billion. a. Assuming the marginal propensity to consume is 0.8 , what happens to the following? (Do they rise or fall? By what amount?) i. Public Savings ii. Private Savings iii. National Savings iv. Investment b. How do your answers to the above change if the marginal propensity to consume is 0.95 ?

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