How do needs- tested spending programs affect the size of the government expenditure multiplier?

Question

Quizplus · Accepted Answer

Needs-tested spending programs reduce the size of the government expenditure multiplier because they are targeted towards specific individuals who have a greater propensity to consume, and therefore have less of a spill-over effect on the overall economy. This means that for each dollar spent on a needs-tested program, there is less of an overall increase in economic activity compared to a dollar spent on a broader-based program.

How Do Needs- Tested Spending Programs Affect the Size of the Government