In our discussion of automatic fiscal stabilizers, we argued that income taxes and transfers increased the stability of real GDP in the face of \(A D\) and \(A S\) shocks. Recall from Chapter 22 that the simple multiplier is given by \(1 /[1-M P C(1-t)-m]\).

a. Explain how the size of the simple multiplier is related to the slope of the \(A D\) curve. (You may want to review the relationship between the \(A E\) curve and the \(A D\) curve, as discussed in Chapter 23 .)

b. Explain how the slope of the \(A D\) curve affects the stability of real GDP in the presence of \(A S\) shocks.

c. Now explain how the size of the simple multiplier is related to the size of the shift in the \(A D\) curve for any given change in autonomous expenditure.

d. For any given \(A S\) curve, show how the size of the \(A D\) shift affects the stability of real GDP.

e. Finally, explain how the economy's automatic stabilizers depend on the sizes of MPC, \(t\), and \(m\).