Respuesta :
Suppose that the MPC is 0.8. Consumer spending would initially fall by $40 billion if the government implemented new taxes on household income totaling $50 billion.
How is the change in consumer expenditure calculated?
C = c+bY is described by the consumption function equation. The value of total consumption will rise if the value of (By) is higher. It clearly states that if income rises, expenses must follow. We must take into account the fact that the pace of income growth exceeds the rate of expenditure growth.
What occurs when expenditure on consumption declines?
Any reduction in consumer spending, no matter how slight, hurt the economy. Economic growth slows as it slows. Declining prices lead to deflation. The economy declines if consumers' lethargic spending doesn't pick up.
In the given question,
Spending on consumption has decreased= MPC * New household income taxes
Decrease in Consumption spending= 0.8 X $50 Billion
Decrease in Consumption spending= 40 Billion
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