Friday, April 6, 2018

Unit 3 Multipliers


The Spending Multiplier Effect

  • An initial change in Spending (C, IG, G, Xn) causes a larger change in aggregate spending or aggregate demand. 
Image result for spending multiplier effect formula

Why does this happen?
  • Expenditures and Income flow continuously which sets off a spending increase in the economy 
Multipliers
  • Positive when there is an increase in Spening
  • Negative when there is a decrease in spending
  • When The government taxes the multipliers work in reverse (Because money is now leaving in circular flow) 
Tax Multiplier (Negative)

Image result for tax multiplier formula
  • If there is a tax-cut then the multiplier is positive because there is now more money in the circular flow 
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1 comment:

  1. Steven N.April 16, 2018 at 9:35 AM

    In your picture example, some of the values we learned in class are replaced with different terms, like the ΔY and ΔT, as well as K(T). Try not to replace your notes entirely with pictures, and instead use them as a complement to the notes you already have.

    ReplyDelete

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