The consumption function isC = $400 billion +0.6Y and the governmentwants to stimulate the economy. By how muchwill aggregate demand at current prices shiftinitially (before multiplier effects) with:a) a $20 billion increase in governmentpurchases?b) a $20 billion tax cut?c) a $20 billion increase in income transfers?What will the cumulative AD shift be for:

Aggregate demand in an economy is the summation of demand for the all the goods and services…

Answered: a) a $20 billion increase in government…

a) a $20 billion increase in government purchases? b) a $20 billion tax cut? c) a $20 billion increase in income transfers? What will the cumulative AD shift be for:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The consumption function is
C = $400 billion +0.6Y and the government
wants to stimulate the economy. By how much
will aggregate demand at current prices shift
initially (before multiplier effects) with:
a) a $20 billion increase in government
purchases?
b) a $20 billion tax cut?
c) a $20 billion increase in income transfers?
What will the cumulative AD shift be for:

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