The 2008 Economic Stimulus: First Take on Consumer ResponseIn a new study, business school professors Christian Broda of the University of Chicago andJonathan Parker of Northwestern University conclude the stimulus payments "are providing asubstantial stimulus to the national economy, helping to ameliorate the ongoing 2008downturn." U.S. households are "doing a significant amount of extra spending" because of the$90 billion in government payments that have gone out so far, they say.As outlined in The Wall Street Journal today, the preliminary assessment found that the typicalfamily increased its spending on food, mass merchandise, and drug products by 3.5 percentonce the rebates arrived relative to a family that hadn't received its rebate yet. The averagefamily spent about 20 percent of its rebate in the first month after receipt, a slightly faster pacethan with the 2001 rebates.The authors estimate that nondurable consumption-a piece of consumer spending thatexcludes big-ticket items such as refrigerators and televisions-rose by 2.4 percent in thesecond quarter as a direct result of the stimulus payments. It'll be boosted by 4.1 percent inthe current quarter, they estimate.- Sudeep ReddySource: The Wall Street Journal online blog post, July 30, 2008. Used with permission of Dow Jones &Company, Inc. via Copyright Clearance Center, Inc.By how much would the $90 billion 2008 tax rebateshave shifted AD if the MPC was 0.95?billion

Answer : Tax rebate leads to increase in disposable income. Increase in disposable income leads to…

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By how much would the $90 billion 2008 tax rebates have shifted AD if the MPC was 0.95? billion

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter12: Fiscal Policy, Incentives, And Secondary Effects

Section: Chapter Questions

Problem 13CQ

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