1) Solution: 95 billion
Explanation: Initial increase in aggregate demand: $100 billion *0.95 = 95 billion
2) Solution: 1900 billion
Explanation: Multiplier = 1 / (1-MPC) = 1 / (1-0.95) = 20
Ultimate increase in aggregate demand: $95 billion * 20 = $1900 billion
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The 2008 fiscal policy package included roughly $100 billion in tax rebates that were mailed to taxpayers. Assume a marginal propensity to consume (MPC) of 0.95. billion a. By how much would aggregate demand shift initially? b. By how much would aggregate demand shift ultimately as a result of these rebates? billion
QUESTION 10 Consider the monthly data, including the estimates for March 2020, and the information in the articles. Which of the following is the best analysis of and prediction for the money market in the U.S. economy for the next few months? a. Shortages are causing panic buying by households, which has increased money demand. Lenders are increasing their lending to keep up with the needs of households and businesses. Money demand is increasing more than money supply. b. Shortages...