Question

A government expenditure multiplier ______.

Answer 1

A government expenditure multiplier is larger than the tax multiplier.

What is tax multiplier?

The fiscal multiplier is the ratio of change in national income caused by a change in government spending in economics. The exogenous spending multiplier, in general, is the ratio of change in national revenue caused by any autonomous change in spending.

The tax multiplier is used to calculate the maximum change in spending when the government raises or lowers taxes. This multiplier's formula is -MPC/MPS. Tax multipliers are always fewer than spending multipliers.

The tax multiplier indicates the eventual rise in real GDP that will occur as a result of a tax adjustment. Surprisingly, the tax multiplier is always one less than the spending multiplier.

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