What is Tax Multiplier?
Tax Multiplier represents the ratio of the change in aggregate output (Gross Domestic Product, GDP) to the change in taxes. Like other multipliers, such as the spending multiplier, the tax multiplier helps economists and policymakers understand the potential impact of fiscal policy changes on the economy.
The tax multiplier is an important concept in macroeconomic analysis and policy formulation. It helps policymakers assess the potential impact of changes in tax policy on economic growth, employment, and inflation. Understanding the tax multiplier allows policymakers to make informed decisions about the appropriate level and structure of taxes to achieve desired economic outcomes.
How to Calculate Tax Multiplier?
Tax Multiplier calculator uses Tax Multiplier = ((1-Marginal Propensity to Consume)/Marginal Propensity to Save) to calculate the Tax Multiplier, The Tax Multiplier formula is defined as a measure of how changes in taxes affect overall economic activity or output within an economy. Tax Multiplier is denoted by TM symbol.
How to calculate Tax Multiplier using this online calculator? To use this online calculator for Tax Multiplier, enter Marginal Propensity to Consume (MPC) & Marginal Propensity to Save (MPS) and hit the calculate button. Here is how the Tax Multiplier calculation can be explained with given input values -> 0.870588 = ((1-0.26)/0.85).