Changing the size of autonomous spending multipliers

Reference no: EM13700844

If we modify our basic three sector model and instead of assuming that taxes are autonomous or fixed in amount (the Tx = Txo assumption) now assume that taxes are a positive function of income, will this modification have the effect of increasing, decreasing, or not changing the size of autonomous spending multipliers (that is, the investment or government spending multiplier)? Note: Feel free to think and apply what you know, or should know, on this question.

1) increases the size of the multipliers

2) decreases the size of the multipliers

3) does not affect the size of the multipliers

Reference no: EM13700844

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