During 2008 , the U.S. government implemented a stimulus package worth $787 billion, aiming to increase aggregate expenditure. This included increased government spending and tax rebates to boost household consumption. The estimated MPC during the period was 0.85.
1. If $500 billion of the stimulus was spent on government projects, what was the expected total increase in GDP?
2. If $200 billion of the stimulus was allocated to tax cuts, how much would it directly increase GDP?
1-$3,333 billion
2-$1,133 billion
1-$4,000 billion
2-$400 billion
1- $3,333 billion
2- $1,333 billion
1- $1,000 billion
2-$1,333 billion