WHY IS THE CONSUMPTION FUNCTION A USEFUL DEVICE FOR GOVERNMENT ECONOMISTS PLANNING A TAX CUT?

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The consumption function is useful in this case because it helps economists understand what the consequences of the tax cut will be.  The function tells them how much consumption will increase if there is a tax cut.  Because consumption makes up such a high percentage of GDP, this is very important information.

What the planners need to know is what the MPC is.  Once they know this, they know how much money will be spent if they cut taxes by a given amount.

Sadly, it's kind of hard to know the MPC.  If we knew it, we'd be less likely to end up having recessions that last.

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