When Government Spending increases by $10 Billion Aggregate Demand increases by MORE than $10 Billion. Which part of Aggregate Demand increases so as to make this ripple effect, or multiplied impact, happen?

When Government Spending increases by $10 Billion Aggregate Demand increases by MORE than $10 Billion. Which part of Aggregate Demand increases so as to make this ripple effect, or multiplied impact, happen?

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter13: Federal Deficits, Surpluses, And The National Debt

Section: Chapter Questions

Problem 20SQ

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When Government Spending increases by $10 Billion Aggregate Demand increases by MORE than $10 Billion. Which part of Aggregate Demand increases so as to make this ripple effect, or multiplied impact, happen?

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Explain why increased government spending of, for example, $15 billion, will have a different impact on aggregate demand than a $15 billion tax cut.
Need help with this. THanks -When Government Spending increases by $10 B Aggregate Demand increases by MORE than $10 B. Which part of Aggregate Demand (C, I, G, or X?) increases so as to make this ripple effect, or multiplied impact, happen?
Differentiate the multiplier effect and crowding-out effect that explain the causes of the differences of government spending in aggregate demand.
The task I am struggling with: In each of the following cases, either a recessionary or an inflationary gap exists. Assume that the aggregate supply curve is horizontal, so that the change in real GDP arising from a shift of the aggregate demand curve equals the size of the shift of the curve. Calculate both the change in government purchases of goods and services and the change in government transfers necessary to close the gap. a) Real GDP equals $100 billion, potential output equals $160 billion, and the marginal propensity to consume is 0.75. b) Real GDP equals $250 billion, potential output equals $200 billion, and the marginal propensity to consume is 0.5. c) Real GDP equals $180 billion, potential output equals $100 billion, and the marginal propensity to consume is 0.8 Thank you very much for your help.
Assuming no crowding-out, investment-accelerator, or multiplier effects, a $100 billion increase in government expenditures shifts aggregate demand a. right by $100 billion. b. left by $100 billion. c. left by more than $100 billion. d. right by more than $100 billion.
If the MPC is 0.80 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $100 billion will eventually shift the aggregate demand curve to the right by Answer $80 billion. $125 billion. $500 billion. $800 billion.