Changes in taxes first cause changes in _____, and thus the government tax multiplier is _____ than the government spending multiplier.

Question

Quizplus · Accepted Answer

Changes in taxes first cause changes in disposable income, which then affect aggregate spending. The government tax multiplier is smaller than the government spending multiplier because part of the tax change is absorbed by changes in savings and consumption rather than directly affecting spending.

Changes in Taxes First Cause Changes in _____, and Thus