APFIVE MPC and Fiscal Policy Effectiveness
A government implements a new fiscal policy that increases the marginal propensity to consume. How would this policy most likely affect the government’s ability to achieve full employment during a recession?
A
No effect as MPC doesn’t impact fiscal policy effectiveness
B
Diminish it by decreasing aggregate expenditures
C
Reduce it by increasing inflationary pressures
D
Enhance it by increasing the fiscal multiplier effect
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