Economics (1 Viewer)

tezza23

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Does any1 have any ideas or know where to find info on this question:

Why does a $1 tax cut have a smaller multiplier effect than a $1 increase in government spending on goods and services?

If any1 knows and can suggest anything, it will be greatly appreciated! =)

Cheers
Terry
 
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Well government spending is 100% investment, where on the other hand when someone gets a tax cut, a certain % is saved (based on their MPS) and savings do not contribute to the multiplier effect.
 

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