Explain why the tax multiplier is smaller in absolute value than the government expenditure multiplier.

If the tax multiplier is smaller in absolute value than the government expenditure multiplier, it implies that the level of tax is high and it has reduced the disposable income of the people. This reduces their consumption and aggregate demand. It has a negative impact on the equilibrium level. The expenditure multiplier will have a larger effect on the economy as compared to the tax multiplier.