The magnitude of the government expenditure multiplier is ________ the magnitude of the tax multiplier.
A)greater than
B)equal to
C)less than
D)not comparable to
E)greater than for expansionary policy and less than for contractionary policy

Question

Quizplus · Accepted Answer

The government expenditure multiplier measures the impact of changes in government spending on the overall economy, while the tax multiplier measures the impact of changes in taxes. Generally, the government expenditure multiplier is greater than the tax multiplier because an increase in government spending directly increases aggregate demand and leads to a larger increase in output and income. In contrast, changes in taxes may have a smaller impact on aggregate demand as households may save some of the additional income from a tax cut.

The Magnitude of the Government Expenditure Multiplier Is ________ the Magnitude