The ________ the marginal tax rate, the ________ the effect on aggregate expenditure from a change in investment.
A) larger; larger
B) larger; smaller
C) smaller; smaller
D) smaller; larger
E) More information about the effect on GDP is needed to answer the question.

Question

Quizplus · Accepted Answer

A larger marginal tax rate reduces disposable income, which dampens the multiplier effect on aggregate expenditure from a change in investment, leading to a smaller effect.

The ________ the Marginal Tax Rate, the ________ the Effect

The the Marginal Tax Rate, the the Effect