A decrease in the income tax rate _Increases_____ the value of the multiplier? That was my answer. Increases?

The relationship between the income tax rate and the value of the multiplier is inversely related. This means that as the income tax rate decreases, the value of the multiplier increases. A decrease in the income tax rate allows individuals and businesses to keep more of their income, which, in turn, leads to higher spending and investment. This increased spending and investment stimulates economic activity and results in a larger multiplier effect.

To understand this relationship, you can refer to the formula for the multiplier: Multiplier = 1 / (1 - Marginal Propensity to Consume). The Marginal Propensity to Consume (MPC) represents the proportion of additional income that people spend. When the income tax rate decreases, individuals have a higher portion of income available for consumption, and thus, their MPC increases. Since the multiplier is reciprocal to (1 - MPC), a higher MPC results in a larger value for the multiplier.

You can also grasp this concept by considering the impact of changes in the tax rate on after-tax income. A decrease in the tax rate means individuals have more disposable income, which they can use for spending or saving. When people spend this additional income, it circulates through the economy multiple times, generating a multiplier effect.

Therefore, your answer of "Increases" is correct.