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| *Ostroff, Fair and Company>>>Other Taxes |
What effect does an introduction of an income tax rate have on the size of the spending multiplier? Explain.? |
Please help me answer this economics problem. Thank you. The spending multiplier is how many times money in a closed system gets spent until it's all used up in taxes. Say you have a little town and a new job is created and the person gets paid $10,000 a year. They spend that money at the grocery store, the gas station, the clothing store, etc. then those people respend it (but have to pay taxes first), etc, etc. If the tax rate goes up the spending multiplier goes down and vice versa. |
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