Unformatted text preview: *4.2 An increase in the tax rate will increase the government spending multiplier (the more negative, the bigger? or the more negative, the smaller?) 4.3 Economic fluctuations have stabled since WWII. An increase in government spending will increase total planned expenditures for goods and services. Cutting taxes will increase the after-tax income of consumers and will also lead to an increase in planned expenditures for goods and services policy makers need to take into account the multiplier for government spending and taxes as they develop policies 4.4 An increase in both government spending and taxes by the same amount GDP Raising the tax rate lowers the MPC adjusted for taxes....
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- Winter '07
- Macroeconomics, Consumption function, 45 degree, government spending