The Effect of a New Proportional Income Tax on the Spending

Multiple Choice

The effect of a new proportional income tax on the spending multiplier is to

A) increase it, because less of each dollar of income is available for spending during each round
B) increase it, because more of each dollar of income is available for spending during each round
C) decrease it, because less of each dollar of income is available for spending during each round
D) decrease it, because more of each dollar of income is available for spending during each round
E) increase it, because a proportional income tax decreases the marginal propensity to consume disposable income