Explain why the multiplier effect of an increase in consumption spending of $100 billion is larger or smaller than the effect of a tax decrease of $100 billion. (Do not just say the spending multiplier is larger or smaller. Explain why.) ЕОC 8.13Explain why the multiplier effect of an increase inconsumption spending of $100 billion is larger or smallerthan the effect of a tax decrease of $100 billion. (Do not justsay the spending multiplier is larger or smaller. Explain why.)

A multiplier is a term used in economics to describe an economic element that, when raised or decreased, affects changes in many other connected economic variables. In most cases, the phrase multiplier refers to the link between government spending and total national revenue. In economics, a rise in expenditure leads to an increase in national income and consumption that is bigger than the amount spent initially. If a company develops a factory, for example, it will hire construction workers and their suppliers as well as factory employees.The consumption multiplier = 1/MPsThe tax multiplier = —MPC / MPSAs MPC is a fraction so tax multiplier is less than the consumption multiplier . When there is rise in consumption spending worth $100 billion then there is rise in disposable income and the aggregate demand and income . But when there is fall in tax worth $100 billion , then initially there is rise in disposable income , then a fraction of disposable income gets increased via rise in aggregate demand and employment.