The tax multiplier is smaller in absolute value than the government purchases mu
ID: 1202801 • Letter: T
Question
The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the
decrease in taxes will be saved by households and not spent, and some portion will be spent on imported goods.
decrease in taxes will be saved by households and not spent, and some portion will be spent on consumer durable goods.
increase in government purchases will be saved by households and not spent, and some portion will be spent on imported goods.
increase in government purchases will be saved by households and not spent, and some portion will be spent on consumer durable goods.
A)decrease in taxes will be saved by households and not spent, and some portion will be spent on imported goods.
B)decrease in taxes will be saved by households and not spent, and some portion will be spent on consumer durable goods.
C)increase in government purchases will be saved by households and not spent, and some portion will be spent on imported goods.
D)increase in government purchases will be saved by households and not spent, and some portion will be spent on consumer durable goods.
Explanation / Answer
Reason being that increase in government purchases will be saved by households and not spent, and some portion will be spent on consumer durable goods.
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