The Magnitude of the Tax Multiplier Is Smaller Than the Magnitude

question 15

Multiple Choice

The magnitude of the tax multiplier is smaller than the magnitude of the government expenditure multiplier because

• A) a change in taxes creates additional induced taxes.
• B) a change in taxes does not change expenditures.
• C) an increase in taxes decreases expenditures.
• D) a change in taxes does not change expenditures by as much as the same size change in government expenditure.
• E) a decrease in government expenditure decreases tax revenue.