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6 Jan 2019

Most macroeconomists believe that it is a good thing that taxes act as an automatic stabilizer and lower the size of the Keynesian multiplier. First, explain both – how do taxes act as an automatic stabilizer? And how do they affect the size of the multiplier? However, a smaller multiplier means that the change in government spending needed to erase an expansionary or recessionary gap is larger. Is this an inconsistency? Why or why not?

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Jarrod Robel
Jarrod RobelLv2
7 Jan 2019

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