Imagine that an economic recession erodes consumer confidence. As a result, the marginal propensity to consume drops from .8 to .6. If the government tries to stimulate the economy by increasing government spending, will the spending be more or less effective at MPC = .6 than at MPC = .8? Explain why.

Answer rating: 100% (QA)

It is more effective when the MPC is 08 then MPC 06 Examp... View the full answer