Tutorial 5 Answers - University of British Columbia Econ...

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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?
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.

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Term
Winter
Professor
Trebbi

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