A change in tax rates
A)has a less complicated effect on GDP than does a tax cut of a fixed amount.
B)has a larger multiplier effect the smaller the tax rate.
C)will not affect disposable income.
D)will not affect the size of the multiplier.

Question

Quizplus · Accepted Answer

A change in tax rates affects the marginal propensity to consume, which in turn affects the multiplier. A smaller tax rate means a larger portion of income is available for consumption, leading to a larger multiplier effect.

A Change in Tax Rates