If the value of a government taxation multiplier is 1.8,which of the following is likely to be true if all other variables remain unchanged?

Question

Quizplus · Accepted Answer

A taxation multiplier of 1.8 indicates that for every $1 reduction in taxation, GDP will increase by $1.80. So option A is correct. Option B is incorrect because an increase in taxation would have a negative impact on GDP, not a positive one. Option C is incorrect because an increase in taxation would not increase GDP. Option D is incorrect because a reduction in taxation would have a positive impact on GDP, but not necessarily an increase of $1.80.

If the Value of a Government Taxation Multiplier Is 1