The Tax Multiplier Is Smaller in Absolute Value Than the Government

question 193

Multiple Choice

The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the

• A)decrease in taxes will be saved by households and not spent,and some portion will be spent on imported goods.
• B)decrease in taxes will be saved by households and not spent,and some portion will be spent on consumer durable goods.
• C)increase in government purchases will be saved by households and not spent,and some portion will be spent on imported goods.
• D)increase in government purchases will be saved by households and not spent,and some portion will be spent on consumer durable goods.

Contrast the efficiency and characteristics of market allocation with those of political processes.

Identify the impact of government actions on economic efficiency and individual welfare.

Understand the role and incentives of bureaucrats and public-sector managers regarding budget and expenditure.

Clarify the reasons behind the growth of government expenditure as a percentage of GDP over time.

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Definitions:

Pacinian Corpuscles

Specialized nerve endings in the skin and viscera that detect mechanical pressure or vibrations.

Statocysts

Sensory organs found in some aquatic invertebrates, such as crustaceans and mollusks, used to sense gravity and enable balance and orientation.

Lateral Line Organs

A system of sense organs found in aquatic vertebrates, used to detect movement and vibration in the surrounding water.

Stereocilia

Hairlike projections on the surface of certain cells, involved in sensory reception, particularly in the inner ear for hearing.