Question 4:

(a) Define both the tax and expenditure multiplier. Under what conditions might the tax multiplier be larger in value than the expenditure multiplier?

(b) What are the possible supply-side impacts of tax cuts on the economy?

(c) How does the Ricardian equivalence view of the effects of tax cuts (and budget deficits) differ from the traditional view? Discuss two objections to the Ricardian equivalence view.