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:

Import Substitution

An economic strategy aimed at reducing dependency on foreign imports through the local production of industrialized products.

Comparative Advantage

Comparative advantage is the ability of a country, individual, company, or region to produce a good or service at a lower opportunity cost than its competitors.

Economic Growth

A rise in the output of products and services within an economy over a certain duration, typically assessed through the Gross Domestic Product (GDP).

Free Trade

The absence of tariffs, quotas, or other governmental restrictions on international trade, allowing goods and services to move freely across borders.