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What is the impact of taxes, income,imports and exports on the multiplier in macroeconomics? |
What is the impact of taxes, income,imports and exports on the multiplier in macroeconomics? When I got my MBA in econ the USA multiplier effect was about 10. Because the American government invests heavily in manufacturing activities and domestic services that form the real basis of the effect, taxation was almost irrelative because when we pay taxes, the money comes back to us in the form of renewed income opportunity. If, however, we lived in ... say Honduras, which imports almost everything but bananas, the multiplier is much less and increased taxation does not lead to increased income opportunity. Imports have money leave the economy, which ends its participation in the multiplier effect. Exports bring new money into the economy, which echos off the incomes of the company and its employees who created the goods. Exports increase the domestic tax base. Imports decrease it. Again, this depends on the economy to which we apply the concept -- what actually matters is the difference between imports and exports. Source(s): a MBA in econ Tax this big army,But afterwards all rest http://www.friends-partners.org/newfrien... Modified 1 year ago The Keynesian spending multiplier is negatively affected by the marginal propensity to save, the marginal propensity to import, and the marginal tax rate. These are essentially the 3 major "leakages" in the economy. Income is affected by the multiplier, not a determinant of the multiplier. The effect of a change in exogenous export spending on a nation's income can be determined by the multiplier, but export spending is not a determinant of the multiplier. The size of the multiplier is an entirely different debate. It's what I do. |
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