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University of British ColumbiaEcon 302Tutorial 511thJuly 2012Question 1Suppose that in the flexible-price full-employment model, the government increases taxes andgovernment purchases by equal amounts. The tax increase reduces consumption spending. Whathappens--qualitatively (tell the direction of change only) to investment, net exports, the exchangerate, the real interest rate, and potential output?
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Question 2Give three examples of changes in economic policy or in the economic environment that wouldshift the total savings curve on the flow-of-funds diagram to the left.