: Question 2 (10 points): Fiscal policy in a static closed-economy model “An increase in government spending decreases the consumer’s welfare.” Is this statement true, false or uncertain? Analyze the statement from the perspective of the one- period closed-economy model from Chapter 5 of Williamson (2018) Macroeconomics. Explain your reasoning in detail and provide a graphical illustration. Your response will be evaluated on the strength of the economic arguments. Question 3 (10 points): Interest rate and savings An increase in the real interest rate r will increase the consumer’s savings.” Is this statement true, false or uncertain? Analyze the statement from the perspective of the two- period endowment model from Chapter 9 of Williamson (2018) Macroeconomics. Explain your reasoning in detail and provide a graphical illustration. Your response will be evaluated on the strength of the economic arguments. 2

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