The Effect of a Decline in Taxes on the Level

question 86

Multiple Choice

The effect of a decline in taxes on the level of income will differ somewhat from an increase in government expenditures of the same amount because:

• A) Tax declines tend to be more expansionary
• B) Households may not spend all of an increase in disposable income
• C) The MPC which applies to the incomes of households always exceeds the MPC which applies to business incomes
• D) The multiplier is high when the MPS is low

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