A tax cut targeted at ---- people may have a bigger effect because
A)poorer;poorer people tend to spend a higher share of their income.
B)poorer;poorer people tend to spend a lower share of their income.
C)wealthier;wealthier people tend to spend a higher share of their income.
D)wealthier;wealthier people tend to spend a lower share of their income.

Question

A tax cut targeted at ---- people may have a bigger effect because ​
A)​poorer;poorer people tend to spend a higher share of their income.
B)​poorer;poorer people tend to spend a lower share of their income.
C)​wealthier;wealthier people tend to spend a higher share of their income.
D)​wealthier;wealthier people tend to spend a lower share of their income.

Quizplus · Accepted Answer

Poorer people tend to have a higher marginal propensity to consume, meaning they are likely to spend a larger fraction of any additional income they receive. This means that a tax cut targeted at poorer people is likely to have a bigger effect on boosting consumption and stimulating the economy compared to a tax cut targeted at wealthier people who may save more of their additional income.

A Tax Cut Targeted at ---- People May Have a Bigger