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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Business

Litzy Garza

15 April, 10:58

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)

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Rayna · 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.