As the tax rate decreases, the government spending multiplier

Name: As the tax rate decreases, the government spending multiplier
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Question

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As the tax rate decreases, people have more disposable income which leads to an increase in consumption spending. The increase in consumption spending will cause an increase in aggregate demand, resulting in an increase in output and income. As a result, the government spending multiplier increases.

As the Tax Rate Decreases, the Government Spending Multiplier