Question: 2. Suppose the consumption function is C 5 $500 billion 1 0.9Y and the government wants to stimulate the economy. By how much will aggregate

2. Suppose the consumption function is C 5 $500 billion 1 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

(a) A $50 billion increase in government purchases?

(b) A $50 billion tax cut?

(c) A $50 billion increase in income transfers?

What will the cumulative AD shift be for

(d) The increased G?

(e) The tax cut?

( f ) The increased transfers?

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