What is the/a tax multiplier in economics. Im writing my paper on the United States economy, and this is the only thing I dont understand. Please help...it doesnt have to be in detail....but just so that I understand. Thanks!!!!!!!!!1
2006-12-01 17:53:46 · 2 answers · asked by Mary Rashelle 2 in Social Science ➔ Economics
The Mulitplier in economics means that fo instance if the government increased the money supply (MONEY INJECTION) in the economy, the output (PRODUCTION) in the economy will increase at a rate that is higher than the intial money injection.
So for example is the US government INCREASED taxes the output of the economy will DECREASE at a rate that is higher than the intial. This is called the Multiplier.
DETAILES:
The multiplier in a economy is dependent on the marginal propensity to consmume of the population. for example if the average US citizen recives one extra dollar he will choose to spend only 60 cents of that dollar. so the multiplier in an economy is equal to: 1/( 1 - 0.6).
The Estimate the value of the mulitiplier economists use econometrics, which is the use statistics in economics.
2006-12-01 22:49:06 · answer #1 · answered by Anonymous · 0⤊ 0⤋
HA HA HA good luck. To be scholastic, check out MacDonalds, WalMart, KMart, etc.
2006-12-02 02:00:51 · answer #2 · answered by Anonymous · 0⤊ 1⤋