The Congressional Budget Office estimates the size of the tax multiplier to be ________ for a 1-year tax cut for higher-income people.

Question

Quizplus · Accepted Answer

The tax multiplier for higher-income people is estimated to be lower (0.1 - 0.6) because higher-income individuals are less likely to spend additional income from tax cuts, reducing the impact on aggregate demand compared to lower-income individuals who are more likely to spend the extra income.

The Congressional Budget Office Estimates the Size of the Tax