Question: Suppose that it has been decided that aggregate demand should be increased, through some sort of fiscal policy, by $40 billion in total. This can

Suppose that it has been decided that aggregate demand should be increased, through some sort of fiscal policy, by

$40 billion in total. This can be done either by purchasing new military aircraft, cutting income taxes, or increasing welfare benefits. Assuming an MPC of 60 percent, how big would each of these actions have to be to raise AD by the desired amount? What affect would these different actions have upon the distribution of income in the United States?

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