The consumption function is C = $400 billion + 0.6Y 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 $20 billion increase in government purchase? ? billion
b) a $20 billion tax cut = ? billions
c) a $20 billion increase in income transfers = ? billion
What will the cumulative AD shift be for:
d) the increased govenerment spending = ? billion
e) the tax cut = ? billion
f) the increased transfers = ? billion