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The Multiplier Model

HOW GOVERNMENT FISCAL POLICIES AFFECT OUTPUT To understand the role of government in economic activity.we need to look at government purchases and taxation. along with the effects of those activities on private sector spending. & you’ might guess, we now add...
The Multiplier Model

B. FISCAL POLICY IN THE MULTIPLIER MODEL For centuries, economists have understood the allocation role of fiscal policy (government tax and spending programs). It has long been known that fiscal programs are instrumental in -deciding how the nation’s output...
The Multiplier Model

The Multiplier Model Compared with the AS-AD Model As you read about the multiplier model, you may have asked yourself how this approach fits with the AS-AD model of Chapter 20. There is no contradiction they are in no w,differentiate theories. Rather, the multiplier...
The Multiplier Model

THE MULTIPLIER MODEL IN PERSPECTIVE The simplest multiplier model has been enormously, influential in business-cycle theory over the last half century. But it gives an oversimplified picture of the economy. One of the most important omissions will the impact of...
The Multiplier Model

Graphical Picture of the Multiplier Our discussion of the multiplier has relied up to now largely on common sense and arithmetic. Can we get the same result using our graphical analysis of saving and investment? The answer is yes. Suppose, as in Table 24-1, that the...
The Multiplier Model

Woodsheds and Carpenter What it that the multiplier is greater than I? Let’s s~ that I hire unemployed resources to build a $1000 woodshed. My carpenters and lumber producers will get an extra S1000 of income. But that is not the end 0( the story. If they all...