Based on our understanding of the model presented in Chapter 3,we know that a reduction in c₁ (where C = c₀ + c₁YD)will cause

Question

Quizplus · Accepted Answer

A reduction in c₁ would mean a decrease in the marginal propensity to consume (MPC), and thus the ZZ line would become flatter. This means that a given change in autonomous consumption (c₀) would have a smaller effect on output, as a flatter ZZ line implies a smaller multiplier.

Based on Our Understanding of the Model Presented in Chapter