Option a is correct. If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $80 billion by cutting taxes by $100 billion.
A consumption line, which is a sloped line made by charting the change in income on the horizontal "x" axis and the change in consumption on the vertical "y" axis, is used to represent MPC.
The percentage of additional income that is spent on consumption is known as the marginal propensity to consume.
Depending on income, MPC fluctuates. MPC tends to be lower at higher income levels.
The Keynesian multiplier, which describes the impact of additional investment or government spending as an economic stimulus, is mostly determined by MPC.
Where C is the change in consumption and Y is the change in income, the marginal propensity to consume is equal to C/Y. If consumption rises by 80 cents for every dollar of new income, MPC equals 0.8 / 1 = 0.8.
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