Answer:
See below.
Explanation:
The shift in aggregate demand can be computed by first identifying the multiplier,
Multiplier = 1 / (1 - marginal propensity to consume - MPC)
Multiplier = 1 / (1 - 0.75) = 4
A 200 billion spending by the government will shift the aggregate demand by 4 * 200 = $800 billion in total.
A decrease in tax has a similar effect as above, this is because a decrease in tax increases the disposable income of consumers and the net effect of increased income is as
Total change in aggregate demand = Increase in income * multiplier
Total change in aggregate income = 200 * 4 = $800 billion
An increase in income means people have more money to spend so they shift the aggregate demand to right by the above value.
Hope that helps.
