Taxes are reduced by $70 billion and income increases by $280 billion. The value of the tax multiplier is

Name: Taxes are reduced by $70 billion and income increases by $280 billion. The value of the tax multiplier is
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Question

Quizplus · Accepted Answer

The tax multiplier is calculated as the change in income divided by the change in taxes, so $280 billion / $70 billion = 4. The negative sign indicates the direction of the effect (a tax cut increases income), so the correct answer is -4.

Taxes Are Reduced by $70 Billion and Income Increases by $280