A tax reduction of a specific amount will be more expansionary the
A)smaller is the economy's MPC.
B)larger is the economy's MPC.
C)smaller is the economy's multiplier.
D)less is the economy's built-in stability.

Question

Quizplus · Accepted Answer

A larger marginal propensity to consume (MPC) means that consumers are more likely to spend additional income, leading to a greater increase in aggregate demand and thus a more expansionary effect from a tax reduction.

A Tax Reduction of a Specific Amount Will Be More