The government 'purchases multiplier' always has a positive sign and the 'tax multiplier' always has a negative sign.

Question

Quizplus · Accepted Answer

The government purchases multiplier is positive because an increase in government spending directly increases aggregate demand, leading to a positive impact on output. The tax multiplier is negative because an increase in taxes reduces disposable income, leading to a decrease in consumption and aggregate demand, thus negatively affecting output.

The Government 'Purchases Multiplier' Always Has a Positive Sign and the 'Tax