In absolute value,the tax multiplier is greater than the government purchases multiplier.

Question

Quizplus · Accepted Answer

The government purchases multiplier is typically larger in absolute value than the tax multiplier because every dollar of government spending directly increases aggregate demand by the full amount, while tax cuts indirectly affect aggregate demand through the increase in household disposable income, part of which may be saved rather than spent.

In Absolute Value,the Tax Multiplier Is Greater Than the Government