Question : Proportional taxes would help to reduce the autonomous expenditure multiplier because ________.
Option 1: taxes increase the MPC
Option 2: MPC does not have any role in it
Option 3: taxes and MPC become equal
Option 4: taxes reduce the MPC
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Correct Answer: taxes reduce the MPC
Solution : The correct option is taxes to reduce the MPC .
Proportional taxes can help reduce the autonomous expenditure multiplier because they have a direct impact on disposable income. The autonomous expenditure multiplier is a concept in economics that represents the change in overall economic activity resulting from an initial change in autonomous spending. Autonomous spending is spending that is not influenced by changes in income.
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