Question

If the government spending multiplier is equal to 5, then the tax multiplier (change in GDP...

If the government spending multiplier is equal to 5, then the tax multiplier (change in GDP divided by the change in taxes) is equal to

a.

-2.5
b.

-4
c.

-5
d.

-6
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Homework Answers

Answer #1

The government spending multiplier is calculated as:

The value of the multiplier is 5:

The tax multiplier is calculated as:

So, the tax multiplier is -4. Therefore, the correct answer is 'Option B'.

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