In general, we expect that a reduction in the income tax rate will make the aggregate expenditures curve
A) steeper and the multiplier larger.
B) steeper and the multiplier smaller.
C) flatter and the multiplier larger.
D) flatter and the multiplier smaller.

Question

Quizplus · Accepted Answer

A reduction in the income tax rate increases disposable income, leading to higher consumption and aggregate expenditures. This makes the aggregate expenditures curve steeper and increases the multiplier.

In General, We Expect That a Reduction in the Income