A tax-cut will have a greater effect on equilibrium GDP if the: A. Marginal propensity to consume is smaller B. Marginal propensity to save is smaller C. Marginal propensity to save is larger D. Average propensity to save is larger

Question

Cory Cisneros

Business

29 July, 15:06

A tax-cut will have a greater effect on equilibrium GDP if the: A. Marginal propensity to consume is smaller B. Marginal propensity to save is smaller C. Marginal propensity to save is larger D. Average propensity to save is larger

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Answers (1)

Know the Answer?

Karma Guerra · Answer 1

The correct answer is (B)

Explanation:

A Tax-cut has many benefits on the overall economic performance of a country. When consumers see a tax-cut, it increases their demand for goods so a tax-cut is beneficial to the equilibrium GDP if the marginal propensity to save decrease due to a tax-cut. If the marginal propensity of save decreases it ultimately benefits the production sector of a country. More production means a better gross domestic product.