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By how much would the $90 billion 2008 tax rebates have shifted AD if the MPC was 0.95? billion

By how much would the $90 billion 2008 tax rebates have shifted AD if the MPC was 0.95? billion

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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**The 2008 Economic Stimulus: First Take on Consumer Response** In a new study, business school professors Christian Broda of the University of Chicago and Jonathan Parker of Northwestern University conclude the stimulus payments "are providing a substantial stimulus to the national economy, helping to ameliorate the ongoing 2008 downturn." U.S. households are "doing a significant amount of extra spending" because of the $90 billion in government payments that have gone out so far, they say. As outlined in The Wall Street Journal today, the preliminary assessment found that the typical family increased its spending on food, mass merchandise, and drug products by 3.5 percent once the rebates arrived relative to a family that hadn't received its rebate yet. The average family spent about 20 percent of its rebate in the first month after receipt, a slightly faster pace than with the 2001 rebates. The authors estimate that nondurable consumption—a piece of consumer spending that excludes big-ticket items such as refrigerators and televisions—rose by 2.4 percent in the second quarter as a direct result of the stimulus payments. It'll be boosted by 4.1 percent in the current quarter, they estimate. — Sudeep Reddy *Source: The Wall Street Journal online blog post, July 30, 2008. Used with permission of Dow Jones & Company, Inc. via Copyright Clearance Center, Inc.* **Question:** By how much would the $90 billion 2008 tax rebates have shifted AD if the MPC was 0.95? ____ billion
Transcribed Image Text:**The 2008 Economic Stimulus: First Take on Consumer Response** In a new study, business school professors Christian Broda of the University of Chicago and Jonathan Parker of Northwestern University conclude the stimulus payments "are providing a substantial stimulus to the national economy, helping to ameliorate the ongoing 2008 downturn." U.S. households are "doing a significant amount of extra spending" because of the $90 billion in government payments that have gone out so far, they say. As outlined in The Wall Street Journal today, the preliminary assessment found that the typical family increased its spending on food, mass merchandise, and drug products by 3.5 percent once the rebates arrived relative to a family that hadn't received its rebate yet. The average family spent about 20 percent of its rebate in the first month after receipt, a slightly faster pace than with the 2001 rebates. The authors estimate that nondurable consumption—a piece of consumer spending that excludes big-ticket items such as refrigerators and televisions—rose by 2.4 percent in the second quarter as a direct result of the stimulus payments. It'll be boosted by 4.1 percent in the current quarter, they estimate. — Sudeep Reddy *Source: The Wall Street Journal online blog post, July 30, 2008. Used with permission of Dow Jones & Company, Inc. via Copyright Clearance Center, Inc.* **Question:** By how much would the $90 billion 2008 tax rebates have shifted AD if the MPC was 0.95? ____ billion
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