What is the effect of a decrease in the MTR?
A)The MLR will increase and the multiplier will increase.
B)The MLR will decrease and the multiplier will increase.
C)The MLR will increase and the multiplier will decrease.
D)The MLR will decrease and the multiplier will decrease.
E)The MLR will remain the same but the multiplier will increase.

Question

Quizplus · Accepted Answer

A decrease in the marginal tax rate (MTR) increases disposable income, leading to higher consumption and a higher marginal propensity to consume (MPC). This results in a decrease in the marginal leakage rate (MLR) and an increase in the multiplier effect.

What Is the Effect of a Decrease in the MTR