The government purchases multiplier will be larger if the marginal income tax rate increases.

Name: The government purchases multiplier will be larger if the marginal income tax rate increases.
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Question

Quizplus · Accepted Answer

The government purchases multiplier is inversely related to the marginal propensity to save (MPS) and taxes. An increase in the marginal income tax rate effectively reduces disposable income, leading to a decrease in consumption and thus a smaller multiplier effect.

The Government Purchases Multiplier Will Be Larger If the Marginal