Reference no: EM132127434
Question: Show what happens to C, I, F, G, Sp, Sc, Sf, and Sg in each of the following cases. Remember that I is always equal to S on an ex post basis. Take these step by step.
(A) Government cuts personal income taxes by $100 billion; Consumers spend all the money on Japanese cars; Japanese invest excess dollars in Treasury securities.
(B) Government cuts income taxes by $100 billion; Half goes to consumers, who buy domestic new cars; Half goes to corporations, which build new motor vehicle plants.
(C) Government raises personal income taxes by $100 billion; Consumers think the tax increase is temporary, so they don't cut spending; Treasury uses extra money to reduce national debt. (D) Government spends $100 billion on public works projects.
(E) Government hires helicopters to drop $100 billion over the country; Consumers spend one-third of the money and save two-thirds of it.
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