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1: Suppose that there is an increase in taxes of $16 billion, and that Real GDP decreases by $20 billion as a result. What is the value of the tax multiplier? 2: Suppose that the euro was trading for $1.2 U.S. dollar in June 2015, and then the price of euro increased to $1.5 in June 2016. How would this change affect the U.S. aggregate demand schedule? 3: Suppose you and your parents are watching on TV an interview with a Wisconsin cranberry farmer who exports his produce to Europe. The farmer is cheerfully talking about how good the business has been due to the weak US dollar against the euro. Your parents, who were planning to take a trip to Italy, are very unhappy about the weak dollar and canceled their trip because of it. Why do the farmer and your parents have these two different reactions to the weak dollar?
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