Suppose the consumption function is $800 billion +0.8y 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 $50 billion increase in government purchases b. A $50 billion tax cut c. A $50 increase from income transfers

Suppose the consumption function is $800 billion +0.8y 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 $50 billion increase in government purchases b. A $50 billion tax cut c. A $50 increase from income transfers

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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Question

a. A $50 billion increase in government purchases

b. A $50 billion tax cut

c. A $50 increase from income transfers

what will the cumulative ad shift be for:

d. The increased government spending

e. The tat cut

f. The increased transfers

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