Question: 6. (a) Until now we have made the assumption that a consumer's MPC is independent of his or her current level of disposable income.

6. (a) Until now we have made the assumption that a consumer's MPC is independent of his or her current level of disposable income. That is, we posit that if a consumer receives additional income, the fraction that is spent does not depend on how much income he or she had initially. Is this assumption realistic? Why or why not? (b) Suppose that the U.S. economy enters a recession and the government wants to in- crease spending to boost real GDP. Suppose further that it wants this spending to take the form of payments made directly to citizens. In light of your answer to part (a), is it possible to get a larger stimulative effect out of the same amount of spending by targeting these payments to specific groups within the population? Why or why not?
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