Hello, I would like some step-by-step demonstration (I am having a lot of problems to understand that)of one of my macroeconomics assignments. Thank you, have a nice evening! The U.S. economy slowed significantly in early 2008, and policy makers were extremely concerned about growth. To boost the economy, Congress passed several relief packages (the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009) that combined would deliver about $700 billion in government spending. Assume, for the sake of argument, that this spending was in the form of payments made directly to consumers. The objective was to boost the economy by increasing the disposable income of American consumers. Calculate the initial change in aggregate consumer spending as a consequence of this policy measure if the marginal propensity to consume (MPC) in the United States is 0.5. Then calculate the resulting change in real GDP arising from the $700 billion in payments. Illustrate that effect on real GDP with the use of a graph depicting the income-expenditure equilibrium. Label the vertical axis “Planned aggregate spending, AEplanned”, and the horizontal axis “Real GDP.” Draw two planned aggregate expenditure curves (AEplanned1 and AEplanned2) and a 45-degree line to show the effect of the autonomous policy change on the equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hello, I would like some step-by-step demonstration (I am having a lot of problems to understand that)of one of my macroeconomics assignments. Thank you, have a nice evening!

The U.S. economy slowed significantly in early 2008, and policy makers were extremely concerned about growth. To boost the economy, Congress passed several relief packages (the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009) that combined would deliver about $700 billion in government spending. Assume, for the sake of argument, that this spending was in the form of payments made directly to consumers. The objective was to boost the economy by increasing the disposable income of American consumers.

Calculate the initial change in aggregate consumer spending as a consequence of this policy measure if the marginal propensity to consume (MPC) in the United States is 0.5. Then calculate the resulting change in real GDP arising from the $700 billion in payments.
Illustrate that effect on real GDP with the use of a graph depicting the income-expenditure equilibrium. Label the vertical axis “Planned aggregate spending, AE_planned”, and the horizontal axis “Real GDP.” Draw two planned aggregate expenditure curves (AE_planned1and AE_planned2) and a 45-degree line to show the effect of the autonomous policy change on the equilibrium.

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