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What best descibes the relationship between change in tax

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Reference no: EM132476520

A. Suppose the MPC is 0.8 and the current tax rate is 25%. What is the government purchases multiplier?

i. If the tax rate increases to 35%, all else remaining equal, what is the government purchases multiplier?

Specify answers to two decimal places.

B. What best descibes the relationship between change in tax rate, and change in government purchase multiplier, with all else remaining equal.

a) Increases in the tax rate decrease the government purchases multiplier.

b) The government purchases multiplier is not affected by the tax rate.

c) Increases in the tax rate increase the government purchases multiplier.

Reference no: EM132476520

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