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
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
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Related questions
Suppose the Fed decided to purchase $100 billion worth of government securities in the open market which is directly deposited into the banking system. What impact would this action have on the economy? Specifically, answer the following questions:
(a) How will M1 be affected initially?
| Decrease by $100 billion | |
| No initial change to M1 | |
| Not enough information to answer | |
| Increase by $100 billion |
(b) By how much will the banking system's lending capacity increase if the reserve requirement is 20 per cent?
Instructions: Enter your response as a whole number.
(c) Must interest rates rise or fall to induce investors to utilize this expanded lending capacity?
| Fall | |
| Rise |
(d) By how much will aggregate demand increase initially (before the effects of the multiplier) if investors borrow and spend all the newly available credit?
Instructions: Enter your response as a whole number.
