Final answer:
The tax multiplier is a measure of how much taxes will fall when income is falling. Option (D) is correct.
Step-by-step explanation:
The tax multiplier, also known as the fiscal multiplier, is a measure of the impact that changes in taxes have on the equilibrium level of real output in an economy. It represents how much taxes change when income changes. The correct answer to your question is option d. The tax multiplier is indeed a measure of how much taxes will fall when income is falling.
The tax multiplier measures how gross domestic product (GDP) is impacted by changes in taxation. GDP is defined as the total value of goods and services produced in a country over a given time frame. The tax multiplier is negative in value because as taxes decrease, demand for goods and services increases.
The multiplier is the amount of new income that is generated from an addition of extra income. The marginal propensity to consume is the proportion of money that will be spent when a person receives a certain amount of money. The formula to determine the multiplier is M = 1 / (1 - MPC).