Question

Suppose the consumption function is C = $400 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

Instructions: Enter your response as a whole number.

(a) A $50 billion increase in government purchases? $......... billion

Instructions: Enter your responses rounded to one decimal place.

(b) A $50 billion tax cut? $....... billion

(c) A $50 billion increase in income transfers? $........ billion

What will the cumulative AD shift be for

(d) The increased government spending? $........ billion

(e) The tax cut? $........ billion

(f) The increased transfers? $......... billion