Consider an economy where a new government policy results in a significant redistribution of income from the wealthiest 10% of households to the bottom 40% of households. Assuming no other changes, what is the most likely immediate impact on the economy's aggregate marginal propensity to consume (MPC)?

Explaining Changes in Aggregate Consumption Behavior

A government is considering two tax cut policies of the exact same total value. Policy A gives the entire tax cut to the wealthiest 1% of households, while Policy B distributes the same total amount evenly among the poorest 50% of households. Both policies will have an identical impact on total consumption in the economy.

Impact of Income Distribution on Aggregate Consumption

Evaluating Economic Stimulus Policies