The tax multiplier represents the change in aggregate demand resulting from a change in government taxes. It measures how much total spending changes for each dollar change in taxes.
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Fiscal Policy: Government actions related to taxation and spending aimed at influencing economic conditions.
Automatic Stabilizers: Features built into the economy, such as progressive taxation and unemployment benefits, that automatically stabilize fluctuations in economic activity without requiring explicit policy action.
Discretionary Fiscal Policy: Deliberate changes made by policymakers to government spending or taxation with the goal of stabilizing or stimulating the economy.