A)The Government increases government spending by $1 billion on goods and servic


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A)The Government increases government spending by $1 billion on goods and services, $3 billion on increased subsidies of pre-school children and increases taxes by $2.5 billion. What is the net effect of these changes if the marginal propensity to withdraw is 20 percent? (repeat the exercise if the MPW is 60%). (40% of the grade) B) Had the government wanted to get the same impact through buying goods and services, what would it have to increase the spending on goods and services. (20% of the grade) Show your work and your answer. C)In a paragraph or two what other impacts (positive or negative) might this decision have on the economy? (40 percent of the grade )

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