When we add a personal income tax to the macroeconomic model, the
A)multiplier becomes larger.
B)multiplier becomes smaller.
C)expenditures schedule shifts upward.
D)expenditures schedule becomes steeper.

Question

Quizplus · Accepted Answer

Adding a personal income tax will decrease disposable income, resulting in a decrease in consumption spending and a lower marginal propensity to consume, both of which will lead to a smaller multiplier.

When We Add a Personal Income Tax to the Macroeconomic