The Reason That the Multiplier Is Smaller If There Are

question 23

Multiple Choice

The reason that the multiplier is smaller if there are variable taxes is that

• A)taxes add to government spending, which increases income.
• B)people get angry about taxes and decide to work less.
• C)tax increases shift the expenditure line upward.
• D)part of an increase in income is taken away in taxes.

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Definitions:

Exempting Interest

The act of not subjecting interest earnings to taxation under certain conditions.

Loanable Funds

This term refers to the funds available for borrowing in the economy, which includes savings and any capital available for lending to others for investment.

Taxation

The practice of a government collecting revenues from individuals and businesses to fund public services and infrastructure.

Loanable Funds

A marketplace where individuals who save provide capital for those in need of loans.