Suppose the consumption function is C = $600 billion + 0.9Y and the government wants to stimulate the economy. At current prices, by how much will aggregate demand shift initially (before multiplier effects) with: a) A $100 billion increase in government purchases? b) A $100 billion tax cut? c) A $100 billion increase in income transfers? What will the total (including the multiplier effect) AD shift be for: d) The increased G? e) The tax cut? f) The increased transfers?
Suppose the consumption function is C = $600 billion + 0.9Y and the government wants to stimulate the economy.
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