When the tax rate increases, the absolute value of the tax multiplier falls.

Name: When the tax rate increases, the absolute value of the tax multiplier falls.
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Quizplus · Accepted Answer

This is because as the tax rate increases, the amount of disposable income available to consumers decreases, leading to a decrease in consumption spending and overall aggregate demand in the economy. However, the magnitude of this effect is smaller than the initial decrease in disposable income, resulting in a smaller tax multiplier.

When the Tax Rate Increases, the Absolute Value of the Tax