In the IS-LM analysis, the increase in income resulting from a tax cut is _____ the increase in income resulting from an equal rise in government spending.
A)usually less than
B)usually greater than
C)usually equal to
D)sometimes less and sometimes greater than

Question

Quizplus · Accepted Answer

In the IS-LM model, a tax cut increases disposable income, leading to higher consumption, but the multiplier effect is generally smaller than that of direct government spending, which directly increases aggregate demand.

In the IS-LM Analysis, the Increase in Income Resulting from a Tax