Which of the following defines the multiplier for a change in autonomous taxes?
A)-s/c
B)1/s
C)1/c
D)-c/s

Question

Quizplus · Accepted Answer

The multiplier for a change in autonomous taxes is given by the formula -c/s, where c is the marginal propensity to consume (MPC) and s is the marginal propensity to save (MPS). This is because a change in autonomous taxes affects disposable income, which in turn affects consumption and saving. The negative sign indicates that there is an inverse relationship between autonomous taxes and output: an increase in taxes leads to a decrease in output and vice versa. Option D is the only one that matches this formula.

Which of the Following Defines the Multiplier for a Change