The tax multiplier equals 1 − spending multiplier.

Name: The tax multiplier equals 1 − spending multiplier.
Brand: Quizplus
Rating: 4.7 (50 reviews)

Question

Quizplus · Accepted Answer

The tax multiplier is the change in equilibrium GDP divided by the change in taxes. The spending multiplier is the change in equilibrium GDP divided by the change in spending. The tax multiplier is equal to 1 minus the spending multiplier because the change in equilibrium GDP is equal to the change in spending minus the change in taxes.

The Tax Multiplier Equals 1 − Spending Multiplier