Question

A cut in tax rates effects equilibrium real GDP through two​ channels: ________ disposable income and consumer​ spending, and​ ________ the size of the multiplier effect.

Answer 1

Answer:

increases; increases

Explanation:

A cut in tax rate has numerous advantages and disadvantage to the economy both in long-run and short-run. A cut in tax rates increases the discretionary cash flow of people, which drives them to expand their utilisation spending. A cut in charge rates increment the size of the multiplier impact