If the Tax Multiplier Is -1

question 149

Multiple Choice

If the tax multiplier is -1.5 and a $20 billion tax increase is implemented, what is the change in GDP, holding everything else constant? (Assume the price level stays constant.)

• A)a $30 billion decrease in GDP
• B)a $30 billion increase in GDP
• C)a $300 billion increase in GDP
• D)a $13.33 billion decrease in GDP
• E)a $13.33 billion increase in GDP

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Definitions:

Political/legal Change

Alterations in the political or legal environment that can impact businesses, economies, and societies.

Economic Change

Alterations in the structure or performance of an economy, often driven by factors such as technological advancements, policy changes, or market dynamics.