Tax multiplier: The ratio of the change in real GDP to an initial change in taxes: tax multiplier = -MPC / (1 - MPC).
How to apply it: Calculate the tax multiplier and explain why it is smaller in absolute value than the spending multiplier.
Course: AP Macroeconomics · Unit: National Income and Price Determination
Practice questions about Tax multiplier on AimFive — get rubric-based feedback showing exactly which points you earned.
AP and Advanced Placement are trademarks of College Board. AimFive is not affiliated with or endorsed by College Board.