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Taxes, the Multiplier Effect, and Automatic Stabilizers
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Taxes, the Multiplier Effect, and Automatic Stabilizers
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20. Fiscal Policy / Taxes, the Multiplier Effect, and Automatic Stabilizers / Problem 1
Problem 1
How does a decrease in taxes affect the multiplier effect and GDP?
A
It has no effect on household income or GDP.
B
It decreases household consumption, leading to a decrease in GDP.
C
It decreases household income, leading to a decrease in GDP.
D
It increases household income, leading to an increase in GDP.
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