![]() ![]() Economists have long debated what determines the marginal propensity to consume and its level to understand changes in demand in the economy.Ī new working paper looks at how the amount of wealth inequality can affect the marginal propensity to consume and the resulting implications for policy. ![]() ![]() ![]() More or less, it tells us how much more spending happens when a household or individual gets more income or wealth. This statistic goes a long way toward understanding the consumption behaviors of families. If someone handed you $10 right now, what would you do with it? Would you decide to spend it right away? Or would you stash it away? Or some combination of the two? The answer to that question would in part reveal your marginal propensity to consume, or MPC for short.
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