📝 Multiple Choice Question
Economics
What is the impact of proportional taxes?
A
Increases the marginal propensity to consume
B
Reduces the autonomous expenditure multiplier
C
Increases the induced expenditure multiplier
D
Increases the autonomous expenditure multiplier
Explanation
Proportional income taxes reduce the marginal propensity to consume out of gross income, which essentially acts as a leakage and decreases the overall autonomous expenditure multiplier.
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