An Increase or Decrease in Taxes Will Have a Multiplier

question 161

True/False

An increase or decrease in taxes will have a multiplier effect on equilibrium GDP on the demand side.

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Definitions:

Leakages

In the context of economics, refers to any portion of income that is not used for domestic spending, such as savings, taxes, or imports.

Injections

In the context of an economy, Injections refer to the introduction of income into the circular flow of money, such as investments, government spending, and exports.

Circular Flow Model

An economic model illustrating the continuous flow of money, resources, and goods among households and businesses in an economy.

Value Added

The increase in worth of a product or service as a result of a particular process, typically measured as the difference between the market price and the production cost.