I have a question on government purchases multiplier and tax multiplier. Government purchases multiplier results from change in government spending and tax multiplier results from a change in taxation. They are conceptually similar to the money multiplier effect in the fractional banking system. I don’t understand the statement “……government purchases multiplier have a larger impact than Tax multiplier. Since some of the initial increase in incomes from the tax cut will be saved, and only a percentage spent on increased consumption, the tax multiplier is smaller than the government purchases multiplier”. I don’t get that logic. Both, government purchases multiplier and tax multiplier results in changes in people’s income and eventually changes the aggregate demand. How could somebody assume, people save some from the additional income due to lower tax and nothing from the additional income people earn due to additional government spending? (We have to assume that the government spending and the tax cut are for the same dollar amounts).