0
Since MPC+MPS=1
Then MPS=1-0.5=0.5
Tax Multiplier= -(MPC/MPS)=-0.5/0.5= -1
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What is the tax multiplier if MPC 0.75?
3
In an open economy mpc is seven tenths and mpi is two tenths The economy is initially in equilibrium What is the effect on GDP of reducing net tax by 10 billion?
the multiplier is 1/(MPC+MPI) which in this case is 1/0.1 = 10 the net effect on GDP is 10 billion * 10 = 100 billion. this is under the assumption that government spending has not reduced by 10billion to cover the reduced revenue. If this occured the net change would be zero.
Why does the multiplier differ between countries?
its due to different tax interest and import ratess
What is Balanced budget multiplier?
BALANCED-BUDGET MULTIPLIER:A measure of the change in aggregate production caused by equal changes in government purchases and taxes. The balanced-budget multiplier is equal to one, meaning that the multiplier effect of a change in taxes offsets all but the initial production triggered by the change in government purchases. This multiplier is the combination of the expenditures multiplier, which measures the change in aggregate production caused by changes in an autonomous aggregate expenditure, and the tax multiplier which measures the change in aggregate production caused by changes in taxes.
If you filed a 2008 tax return how much would your stimulus check be?
if you filed a 2008 tax return how much would your stimulus check be?
What is the tax multiplier if MPC 0.75?
3
How can you derive the tax rate multiplier?
Taxation Multiplier = - (MPC) / (1 - MPS) Where, MPC = marginal propensity to consume, and MPS = marginal propensity to save.
What is tax multiplier?
The formula for this simple tax multiplier. (m[tax]), is: m[tax] = - MPC x 1 ---- MPS = - MPC ---- MPS Where MPC is the marginal propensity to consume and MPS is the marginal propensity to save. This formula is almost identical to that for the simple expenditures multiplier. The only difference is the inclusion of the negative marginal propensity to consume (- MPC). If, for example, the MPC is 0.75 (and the MPS is 0.25), then an autonomous $1 trillion change in taxes results in an opposite change in aggregate production of $3 trillion.
If you know tax multiplier how do you figure government spending multiplier?
you could do it two ways .If you have the MPC could divide it
Why tax multiplier is always be smaller than govt spending multiplier?
If the full multiplier for G (i.e. ignoring crowding out effects) is = change in G/Multiplier Then the tax multiplier is = change in T x marginal propensity to consume/multiplier since the mpc is between 0 and 1 the tax multiplier is less. Intuitively it is not difficult to see why, the change tax enters spending decisions through consumption and consumption is dependant on the mpc. Whereas as G affects spending decisions directly - it is a injection into the economy that does not have to work through some indirect source to have an effect on the economy.
Why tax multiplier is negative.show graphically the negative impact of tax multiplier on income?
tax multiplier is negative because when government imposes tax, the income decreases
If the tax multiplier is -2 what is the government multiplier?
3
Why the government spending multiplier is different form the tax multiplier?
The government spending multiplier is different form the tax multiplier from the top of my head is because the government spending total effect ripples off. That is if government spending increase then the total income increases. When total income increase, consumption increases, when consumption increases total income increases further (as consumption is a factor of total income), and this pattern is carried forward. This is the the multiplier effect, such that an increase in government spending's final impact on income is much bigger than its initial increase. The tax multiplier on the other hand, has a much smaller effect than government spending. This is because tax is only a portion of the consumer income. That is, if there is a tax cut, consumers only save a fractional amount (specifically 1-MPC) of a tax cut. As a result of the smaller boost in spending form ma tax cut, the ripples/multiplier effect of a tax cut is much less than an increase in government spending.
If the government spending multiplier is 6 what is the tax multiplier?
9
IS the tax multiplier always positive?
tax multiplier is always negative not positive, because of downward sloped aggregte demand curve
In an open economy mpc is seven tenths and mpi is two tenths The economy is initially in equilibrium What is the effect on GDP of reducing net tax by 10 billion?
the multiplier is 1/(MPC+MPI) which in this case is 1/0.1 = 10 the net effect on GDP is 10 billion * 10 = 100 billion. this is under the assumption that government spending has not reduced by 10billion to cover the reduced revenue. If this occured the net change would be zero.
Why does the multiplier differ between countries?
its due to different tax interest and import ratess
