Fiscal Policy and Debt: End of Chapter Problem 1. Why does $100 million in government spending boost the economy more than a $100 million tax cut A tax cut has a direct impact on employment, whereas an equivalent change in government spending has an indirect impact on employment. The government tax multiplier has a smaller effect on spending than the government spending multiplier. A tax cut has a direct impact on output, whereas an equivalent change in government spending has an indirect impact on output. The government tax multiplier has a larger effect on consumption than the government spending multiplier.