Given Suppose in an effort to stimulate aggregate demand the government mails tax rebate checks to all

Given Suppose in an effort to stimulate aggregate demand the government mails tax

effort to stimulate aggregate demand the government mails tax rebate checks to all household totaling billion for the

Given Suppose in an effort to stimulate aggregate demand the government

mails tax rebate checks to all household totaling billion for the

Given Suppose in an effort to stimulate aggregate

Given Suppose in an

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Amount: | $20 |

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Paper instructions

Given: Suppose in an effort to stimulate aggregate demand, the government mails tax rebate checks to all household, totaling $50 billion for the economy as a whole. Ignore crowding-out effect.
A) If the marginal propensity to consume (MPC) is 0.90, by how much would you expect these tax rebates to initially increase aggregate demand? Show your calculations step-by-step.
B) TRUE OR FALSE: Holding other things constant, a higher MPC is bound to yield a larger impact on the initial demand.
C) Including the multiplier effect, what is the total effect of these tax rebates on the aggregate demand. Show your calculations step-by-step
D) TRUE OR FALSE: Holding other things constant, a higher MPC is bound to yield a lower impact on the total demand.
E) How does the total effect of this policy compare to the total effect of a $50 billion
increase in government spending? Show your calculations step-by-step

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