The level of consumer conﬁdence signiﬁcantly affects the marginal propensity to consume.

Question

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Consumer confidence refers to the degree of optimism or pessimism that consumers feel about the overall state of the economy and their personal financial situation. When consumer confidence is high, people tend to be more willing to spend money, which leads to a higher marginal propensity to consume (MPC). On the other hand, when consumer confidence is low, people tend to cut back on spending, which leads to a lower MPC. Therefore, the level of consumer confidence does have a significant effect on the MPC.

The Level of Consumer Conﬁdence Signiﬁcantly Affects the Marginal Propensity