Say that C = XXXXXXXXXX8Y, I = 4, G =1. Let us say that the government promotes thriftiness by...

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Say that C = XXXXXXXXXX8Y, I = 4, G =1. Let us say that the government promotes thriftiness by giving a tax break to people who save. This leads to a decline in the marginal propensity to consume by -.3 (i.e. MPC = 0.5: people consume half of their income). What is the new value of aggregate income?

Robert · Accepted Answer

Say that C = 15 + 0.8Y, I = 4, G =1. Let us say that the government promotes thriftiness by 
giving a tax break to people who save. This leads to a decline in the marginal propensity to 
consume by -.3 (i.e. MPC = 0.5: people consume half of their income).

Say that C = XXXXXXXXXX8Y, I = 4, G =1. Let us say that the government promotes thriftiness by giving a tax break to people who save. This leads to a decline in the marginal propensity to consume by...

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