Illustrate what will be the cumulative effects

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Reference no: EM1350017

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? Illustrate 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.

Reference no: EM1350017

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