Asked by Salman

The Keynesian Multiplier under lump sum taxes

A. Smaller than that under proportional tax

B. Equal to that under proportional tax

C. Larger than that under proportional tax

D. Can be larger or smaller depending upon the size of the tax

Choose the right answer from A, B, C or D?
Answered by Salman
If investment is dependent on income in addition to interest rate (assuming C and G have usual forms) then the Keynesian multiplier will

A. Not Exist

B. Equal to as compared to the case where investment is not dependent on Y

C. Smaller as compared to the case where investment is not dependent on Y

D. Larger as compared to the case where investment is not dependent on Y

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