Exhibit 11-5
-In an economy characterized by the aggregate expenditure line in Exhibit 11-5,if net taxes was independent of the level of real GDP what would the tax multiplier be equal to?
A)0
B)1
C)2
D)3

Question

Exhibit 11-5 
-In an economy characterized by the aggregate expenditure line in Exhibit 11-5,if net taxes was independent of the level of real GDP what would the tax multiplier be equal to?
A)0 
B)1 
C)2 
D)3

Quizplus · Accepted Answer

The tax multiplier is equal to 1 when net taxes are independent of the level of real GDP. This is because a change in government spending will lead to a one-time change in real GDP, and there will be no further changes in real GDP due to changes in net taxes.

Exhibit 11-5 -In an Economy Characterized by the Aggregate Expenditure Line in Expenditure