Question 1
A decrease in lump-sum taxes will
◦ make the consumption function flatter.
◦ make the consumption function steeper.
◦ shift the consumption function downward.
◦ shift the consumption function upward.
Question 2
The tax multiplier is
◦ the ratio of the change in taxes to the change in the equilibrium level of output.
◦ the
MPC multiplied by the
MPS.
◦ the difference in taxes multiplied by the change in the equilibrium level of output.
◦ the ratio of the change in the equilibrium level of output to the change in taxes.
