The tax multiplier
A) is negative.
B) is larger in absolute value compared to the government purchases multiplier.
C) only works when taxes are cut.
D) is less than one.

Name: The tax multiplier A) is negative. B) is larger in absolute value compared to the government purchases multiplier. C) only works when taxes are cut. D) is less than one.
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Question

Quizplus · Accepted Answer

The tax multiplier is negative because when taxes are increased, disposable income decreases, leading to a decrease in aggregate demand and output.

The Tax Multiplier