If the MPS is 0.8 and t is 0.3, then the tax multiplier is about -1.03.

Name: If the MPS is 0.8 and t is 0.3, then the tax multiplier is about -1.03.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The tax multiplier is calculated as -MPC/MPS. Given MPS (Marginal Propensity to Save) is 0.8, then MPC (Marginal Propensity to Consume) is 1 - MPS = 0.2. The tax multiplier formula does not directly involve the tax rate (t), so the given values lead to a tax multiplier of -MPC/MPS = -0.2/0.8 = -0.25, not -1.03.

If the MPS Is 0