Suppose the consumption function is C-$700 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 responses as a whole number. a a $30 billion increase in government purchases? billion b. a $30 billion tax cut? billion c. a $30 billion increase in income transfers? billion What will the cumulative AD shift (after multiplier effects) be for d. the increased government spending? $ e the tax cut? billion billion f the increased transfers? billion

Suppose the consumption function is C-$700 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 responses as a whole number. a a $30 billion increase in government purchases? billion b. a $30 billion tax cut? billion c. a $30 billion increase in income transfers? billion What will the cumulative AD shift (after multiplier effects) be for d. the increased government spending? $ e the tax cut? billion billion f the increased transfers? billion

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 2CQQ

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pls answer urgent all question Q1,a,b,c . Q1-Suppose the government reduces taxes by $20 billion, that there is no crowding out, and that the marginal propensity to consume is ¾. a. What is the initial effect of the tax reduction on aggregate demand? b. What additional effects follow this initial effect? What is the total effect of the tax cut on aggregate demand? c.How does the total effect of this $40billion tax cut compare to the total effect of a $40 billion in governmentpurchases? Why?
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