If wealthy U.S.consumers save most of their tax cut, this means that, compared to government spending changes,
A)tax changes would have a higher multiplier effect.
B)tax changes would have a weaker multiplier effect.
C)government spending would have a weaker multiplier effect.
D)U.S.consumers would spend all of their tax cut.

Question

Quizplus · Accepted Answer

The multiplier effect refers to the total impact a certain change in spending or taxation will have on the economy. Since wealthy U.S. consumers are likely to save most of their tax cut, this means the effect on the economy will be weaker compared to if the government were to spend that money directly. Therefore, tax changes would have a weaker (not higher) multiplier effect compared to government spending changes.

If Wealthy U