What is the multiplier for a cut in direct tax?

Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
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8. A closed economy with unemployed resources is described by the following
relationships
Consumption: C = a + b(Y- T)
Lump sum direct tax: T
Government expenditure: G
Investment: I
Where Y is national income
What is the multiplier for a cut in direct tax?
1-b
1/(1-b)
1
b/(1-b)
Transcribed Image Text:8. A closed economy with unemployed resources is described by the following relationships Consumption: C = a + b(Y- T) Lump sum direct tax: T Government expenditure: G Investment: I Where Y is national income What is the multiplier for a cut in direct tax? 1-b 1/(1-b) 1 b/(1-b)
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