Answer to Question #98568 in Macroeconomics for Rose

Question

2. If AD shifts $60 for every $1000 change in consumer wealth, by how much will AD increase if the stock market rises in value by $400 billion?

3. 3. If AS decreases by $50 billion for every 1 percentage point increase in tax rates, by how much will AS shift to the left when the tax rate is raised from 35% to 40%?

Answer 1

2. If the stock market rises in value by $400 billion, then the AD will increase by: 60/1000×400 = $24 billion.

3. If the tax rate is raised from 35% to 40%, then the AS will decrease by: 50×(40 - 35) = $250 billion.