The size of the multiplier effect for government spending is not as big as for tax and transfer changes.

Question

Quizplus · Accepted Answer

The size of the multiplier effect can vary, but it is not inherently smaller for government spending compared to tax and transfer changes. In fact, many economists argue that direct government spending can have a larger multiplier effect because it directly injects money into the economy, whereas the impact of tax and transfer changes depends on the marginal propensity to consume of the recipients.

The Size of the Multiplier Effect for Government Spending Is