Save All Answers Close Win QUESTION 1 Why does govemment spending theoretically

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Save All Answers Close Win QUESTION 1 Why does govemment spending theoretically give a bigger boost to the economy than tax outs? The miteerdet a age ty gmnment gondngthanthe mutplier onect for tax aits snoe tax ans has less of adme impact on consumption ada put Themtli" efoct "derfor goverment spendigthan the multipler efect for tux outs since tax cuts has less of a direct impact on oor sumption and o.tot OA noeme has adiedmpact on oapt, whereas an equhaert change n goverment pening has an idrect impact on output, whereas an equivalent change in govenment spending has an indirect impact on omployment QUESTION 2 Answer the next queation on the basis of the folowing diagram 8 9 0 0

Explanation / Answer

The multiplier effect is a larger for government spending than the multiplier effect for tax cuts since tax cuts have less of a direct impact on consumption and output

Tax cuts have less of an impact on the economy than government spending because some portion of the income from that of the tax cuts is saved and presents a leakage.Thus it will have a comparatively less impact on output.

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