The presence of income taxes and imports make the multiplier

Question

Quizplus · Accepted Answer

The presence of income taxes and imports reduces the size of the multiplier because a portion of income is either taxed away or spent on imports rather than on domestically produced goods and services. However, the multiplier remains positive, indicating that an initial change in spending still leads to a larger change in the overall level of economic activity, just not as large as it would be without taxes and imports.

The Presence of Income Taxes and Imports Make the Multiplier