The tax multiplier is greater than the spending multiplier regardless of the value of the marginal propensity to save (MPS).

Question

Quizplus · Accepted Answer

The tax multiplier is actually smaller than the spending multiplier, as it depends on the marginal propensity to consume (MPC) and the relative size of the tax cut to the economy. The larger the MPC and tax cut relative to the economy, the smaller the tax multiplier. In contrast, the spending multiplier depends solely on the MPC and the size of the government spending increase.

The Tax Multiplier Is Greater Than the Spending Multiplier Regardless