Why Is Government Spending Multiplier

Government spending multiplier is positive multiplier while tax multiplier is negative multiplier. Government multiplier is always higher than the tax multiplier. However, the tax multiplier is smaller than the spending multiplier. This is because when the government spends money, it directly purchases something, causing the full amount of the change in expenditure to be applied to the aggregate demand. When the government cuts taxes instead, there is an increase in disposable income. Part of the disposable income will be spent, but part of it will be saved. The money that is saved does not contribute to the multiplier