Mathematically, the value of the tax multiplier in terms of the marginal propensity to consume (MPC) is given by the formula:
A) MPC − 1.
B) (MPC − 1) / MPC.
C) 1 / MPC.
D) 1 − [1 / (1 − MPC)].

Question

Quizplus · Accepted Answer

The tax multiplier formula is given as 1/(1-MPC) and can be simplified as 1-[(1/MPC)-1], which further simplifies to D) 1- [1/(1-MPC)]

Mathematically, the Value of the Tax Multiplier in Terms of the Marginal