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DU The Marginal Propensity to Consume Measure Discussion

DU The Marginal Propensity to Consume Measure Discussion



Instead of a discussion board, this week you will submit an individual written assignment. Address the following questions below in a short essay. Your multi-paragraph essay should directly answer all four of the questions.  Direct answers to the questions should also be supplemented with additional information to form a well-developed, well-written essay. At minimum, your essay should have four paragraphs, one for each set of questions.  If you reference outside sources, provide a full citation.

What is the marginal propensity to consume? Explain it in your own words.

How do you think the value of MPC varies across households with different levels of income? Who has relatively higher or lower MPCs, people with high incomes or low incomes? Why?

We have discussed the government’s use of fiscal policy to stimulate the economy. How might the government increase individuals’ disposable income?

Implications for policy: If the goal is to stimulate the economy and maximize the multiplier effect, how can knowing who is more likely to spend an extra dollar make fiscal policy more effective? Be sure to define the multiplier effect.


“Planned Aggregate Expenditure”
By Sherry Jensen, PhD

This presentation will explore assumptions of the Keynesian Model, explain planned aggregate expenditure, and identify the use of stabilization policies to influence the economy


“Short-Run Equilibrium Output”
By Sherry Jensen, PhD

This presentation will apply the PAE Model to solve for the short-run equilibrium output in the economy


“Federal Reserve”

By Sherry Jensen, PhD

This presentation will discuss how the Fed influences interest rates as well as their impact on planned aggregate expenditure and the equilibrium level of output on the economy

Please watch the Plain English, Making Sense of the Federal Reserve videoLinks to an external site. prior to viewing the lecture.


Principles of Macroeconomics, 8th Edition

By Frank, Bernanke, Antonovics, and Heffetz

Chapter 13, “Spending and Output in the Short Run”

Chapter 14, “Stabilizing the Economy: The Role of the Fed”

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