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Assume that the marginal propensity to consume is 0.8. The tax multiplier will then be ................ |
4 -4 -5 5 |
-4 |
The correct answer is Option (2) → -4 The tax multiplier (MT) measures the change in equilibrium income due to a change in taxes. The formula for the tax multiplier is: MPC/ (1-MPC) MPC=0.8 MT= - 0.8/ 0.2 = -4 |
