Assume autonomous net taxes rise by $400, and the marginal propensity to consume equals 3/4.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, how will consumption initially change?

Question

Quizplus · Accepted Answer

When autonomous net taxes increase by $400 and the marginal propensity to consume (MPC) is 3/4, the initial change in consumption will be a decrease of $300. This is because with an MPC of 3/4, for every dollar increase in net taxes, consumption decreases by 75 cents ($400 * 3/4 = $300).

Assume Autonomous Net Taxes Rise by $400, and the Marginal