Q1. Suppose China produces both agricultural and capital goods. Draw and show the change in the PPF when an outbreak of avian flu sickens millions of agricultural and industrial workers.

Q2. According to the traditional theory of marginal utility as presented in the textbook, as more units of a good are acquired, the consumer's marginal utility.

Q3. 1. What is the relationship between the MPC and the Multiplier? (explain or state the equations)

2. What do you mean by the Multiplier Effect? Describe this effect.

3. Explain what happens to aggregate demand in these situations:

a) pessimistic firms decease investment spending.

b) Government spending increases to try to stimulate the economy

c. presently price level decreases.