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Unformatted text preview: government spending • Government spending multiplier = 1 / MPS Tax Multiplier • The ratio of change in the equilibrium level of output to a change in taxes • Tax Multiplier = - (MPC / MPS) Balanced Budget Multiplier • The ratio of change in the equilibrium level of output to a change in government spending where the change in government spending is balanced by a change in taxes so as not to create any deficit. The balanced-budget multiplier is equal to one: the change in Y resulting from the change in G and the equal change in T is exactly the same size as the initial change in G or T itself. • Balanced Budget Multiplier = 1...
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This note was uploaded on 02/21/2008 for the course ECON 4.3 taught by Professor Fox during the Spring '99 term at Pennsylvania State University, University Park.
- Spring '99