Advertisements
Advertisements
प्रश्न
Explain why the tax multiplier is smaller in absolute value than the government expenditure multiplier.
Advertisements
उत्तर
The tax multiplier is smaller in absolute value than the government expenditure multiplier, as the government expenditure affects the total expenditure and taxes through the multiplier. Tax multiplier also influences disposable income that affects the overall consumption level.
The reason is explained through the following example.
Let’s assume MPC be to 0.80.
Then, the government expenditure multiplier `=1/(1-c)`
`=1/(1-0.80)`
`=1/0.20=5`
Tax multiplier `=(-c)/(1-c)=(-0.80)/(1-0.80)`
`=(-0.80)/0.20=-4`
This shows that government expenditure multiplier is more than tax multiplier.
APPEARS IN
संबंधित प्रश्न
Fiscal deficit equals :
(a) Interest payments
(b) Borrowings
(c) Interest payments less borrowing
(d) Borrowing less interest payments
Distinguish between revenue deficit and fiscal deficit.
Explain the relation between government deficit and government debt.
Are fiscal deficits inflationary?
Discuss the issue of deficit reduction.
Answer the following question.
In the given figure, what does the gap 'KT' represent? State any two fiscal measures to correct the situation.
Classify the following statement into positive economic or normative economic, with suitable reason:
Government should try to control the rising fiscal deficit.
Regressive tax is that which is ______.
Fiscal deficit = ______.
The primary deficit in a government budget is ______.
| S. No. | Content | Rs (in crores) |
| 1. | Revenue Expenditure | 100 |
| 2. | Capital Receipts | 40 |
| 3. | Net Borrowings | 38 |
| 4. | Net Interest Payments | 27 |
| 5. | Tax Revenue | 50 |
| 6. | Non-tax Revenue | 15 |
Which of the following is MOST LIKELY to be the main contributor to the fiscal deficit in this case?
Assertion (A): Fiscal deficit is measured in terms of borrowings.
Reason (R): External borrowings increases the Fiscal deficit.
The difference between fiscal deficit and interest payment is known as ______
______ are those transactions that are undertaken to cover deficit or surplus in autonomous transactions.
Which of the following transactions are correct about ORT?
Which of the following points are related to the current alarm?
Identify the correctly matched pair of the items in Column A to those in Column B:
| Column A | Column B | ||
| 1 | Fiscal Deficit | (a) | Other than interest payments |
| 2 | Primary Deficit | (b) | Borrowings less interest payments |
| 3 | Revenue Deficit | (c) | Borrowings |
| 4 | Tax Deficit | (d) | Borrowings in government budget |
The shape of average revenue curve in monopoly is ______
