Business, 06.05.2020 08:36 kvngsavage15685
Two countries, A and B, both are currently in recession. The values of the MPS for A and B are 0.1 and 0.5 respectively. The governments of both countries are planning to boost income through an expansionary policy of a tax cut of $1 billion.
The policy of tax cut:
A) may have the same effect on income, because it depends on MPC and not on MPs.
B) will be less effective in country B than in country A since the value of the tax multiplier is lower in country B.
C) will be more effective in country B than in country A since the value of the tax multiplier is larger in country B.
D) will more effective in country B than in country A since the value of the tax multiplier is lower in country B and tax multipliers are negative.
Answers: 2
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