Suppose the consumption function is given as,
C= $400 billion + 0.8Y,
and the government wants to stimulate the economy. How much will AD at current prices (shift horizontally) before multiplier effects with:
a. a $50 billion increase in government spending?
b. a $50 billion tax cut?
c. a $50 billion increase in income transfers?
What will be the cumulative effects including the multiplier for each of the above three policy choices?
a. the $50 billion increase in government spending? b. the $50 billion tax cut?
c. the $50 billion increase in income transfers