The tax multiplier is

Question

Quizplus · Accepted Answer

The tax multiplier is the ratio of the change in the equilibrium level of output to the change in taxes. This means that if there is a change in taxes, the tax multiplier tells us how much the equilibrium level of output will change in response. Therefore, option (D) is the correct answer. Option (A) is incorrect because it reverses the numerator and denominator of the tax multiplier. Option (B) is incorrect because it describes the formula for the spending multiplier, not the tax multiplier. Option (C) is also incorrect because it confuses the tax multiplier with the change in taxes themselves.

The Tax Multiplier Is