I have a critical thinking question for someone! :)?

[torin7]

The more details the better :)

Senario:

- an increase in government spending will increase total planned expenditures for goods and service.
-cutting tazes will increase the after-tax income of consumers and will also lead to an increase in planned expenditures for goods and services.
- policymakers need to take into account the multipliers for government spending and taxes as they develop policy.

Question:

Explain how the reduction in equity and home value might make changes in the consumption function, autonomous consumption, and marginal propensity to consume? If you lose $50,000 in home equity because of a drop in home values, so what, you can't spend that money anyway, right? Why would this change your spending patterns?

[matchitisiw]

Chance;
There is no multiplier for government spending, its a cost, a drain on the economy.
A loss of property value reduces net worth, and potentially reduces property tax revenues, both bad outcomes for the economy, and government spending for services.