In response to a prolonged recession, the monetary authorities of Lithuania decided to cut taxes. The impact of the multiplier effect will be felt the most if
Lithuania is very open to international trade and imports are high relative to GDP.


Lithuania’s citizens are affluent and tend to save a relatively high proportion of their income.


Lithuania’s citizens have relatively low incomes and spend little on foreign holidays or imported goods.


Lithuania’s citizens are cautious and sceptical, leading them to assume that the tax cut will soon be reversed.