Please include introduction, body, conclusion and your opinion with examples in the answer.

Q1) Case:

Such inequality could matter for macroeconomics if households with different amounts of wealth respond differently to the same aggregate shock. Indeed, microeconomic studies have often found that the annual marginal propensity to consume out of one-time income shocks (henceforth, the MPC) is substantially larger for low-wealth than for high-wealth households. In the presence of such microeconomic heterogeneity, the aggregate size of, say, a fiscal shock is not sufficient to compute the shock's effect on spending; that effect will depend on how the shock is distributed across categories of households with different MPCs. Poterba (2000) has suggested that the marginal propensity to consume out of wealth may have declined in the 1990s. According to Poterba, the main reason for this decline is the growing importance of equities in household wealth. Since the number of households holding equities is still lower than the number holding many other kinds of assets, and since a growing part of equity investments are held in tax-favored retirement accounts, the marginal propensity to consume out of equity wealth may be small.

Q1) Describe what effect an increase in the marginal propensity to save will have on the slope of the planned aggregate expenditures line and on the size of the multiplier, with examples.