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

Suppose the consumption function is C = $500 billion + 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 cuts?
(c) A $50 billion increase in income transfer?

Step by Step Solution

3.26 Rating (170 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

a Computation of the Government purchases C 500 billion 09Y The equation explain 09 is the ... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

68-B-E-M-E (198).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!