Question

Suppose the consumption function is C = $400 billion + 0.9Y and the government wants to...

Suppose the consumption function is C = $400 billion + 0.9Y 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 $60 billion increase in government purchases? $  billion

Instructions: Enter your responses rounded to one decimal place.

(b) A $60 billion tax cut? $  billion

(c) A $60 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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