Econ306Lecture9 - International Economics II Lecture Notes...

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Unformatted text preview: International Economics II Lecture Notes 9 Alper Duman July 31, 2009 Alper Duman International Economics II Lecture Notes 9 open Macroeconomy Multiplies I Autonomous spending multiplier is the coefficient of the change in income when an autonomous spending item, C, , G, or X changes. I Multiplier process involves rounds of income generation and spending by various households, firms and government. I Autonomous spending multiplier in the open economy ( k ) is k = 1 1- ( MPC- MPM ) (1) which equals to k = 1 MPS + MPM (2) Alper Duman International Economics II Lecture Notes 9 I If the economy were a closed economy, then there would be no imports and hence MPM would be zero, then the simple multiplier would be just 1 / (1- MPC ) I This multiplier will be larger than the open economy multiplier, due to the fact that all of the income generated would be spent on the domestic goods and services and induce more output growth Alper Duman International Economics II Lecture Notes 9 I What happens when there is a change in autonomous imports,...
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Econ306Lecture9 - International Economics II Lecture Notes...

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