The tax multiplier is negative because an increase in taxes _______ disposable income, which then _______consumption and GDP.

Name: The tax multiplier is negative because an increase in taxes _______ disposable income, which then _______consumption and GDP.
Brand: Quizplus
Rating: 4.9 (38 reviews)

Question

Quizplus · Accepted Answer

When taxes increase, disposable income decreases, which means people have less money to spend. This decrease in consumption leads to a decrease in GDP, resulting in a negative tax multiplier.

The Tax Multiplier Is Negative Because an Increase in Taxes