Refer to the above data.A 10 percent proportional tax on income would:
A)affect neither the size of the multiplier nor the stability of the economy.
B)increase the size of the multiplier and make the economy more stable.
C)increase the size of the multiplier and make the economy less stable.
D)reduce the size of the multiplier and make the economy more stable.

Question

Refer to the above data.A 10 percent proportional tax on income would:
A)affect neither the size of the multiplier nor the stability of the economy. 
B)increase the size of the multiplier and make the economy more stable. 
C)increase the size of the multiplier and make the economy less stable. 
D)reduce the size of the multiplier and make the economy more stable.

Quizplus · Accepted Answer

A 10 percent proportional tax on income would reduce disposable income, leading to a decrease in consumption expenditure, and a decrease in the size of the multiplier. However, it would also make the economy more stable by reducing the volatility of consumption expenditure, as a smaller proportion of disposable income would be spent.

Refer to the Above Data