Estimating Changes in Aggregate Demand.
a. Suppose C = Ca + 0.6y and that a shock decreases Ca by $10 billion. By how much will equilibrium income decrease?
b. An economy has an MPC of 0.6. By how much will a $10 billion increase in government purchases increase equilibrium income? By how much will a $10 billion increase in taxes decrease equilibrium income?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.