Econ exam 4 - Sarah Anderson Econ Exam 4 What is meant by...

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Sarah Anderson Econ Exam 4 What is meant by the income expenditure multiplier and what determines its value? is the idea that an initial amount of spending (usually by the government) leads to increased consumption spending and so results in an increase in national income greater than the initial amount of spending. In other words, an initial change in aggregate demand causes a change in aggregate output for the economy that is a multiple of the initial change. However, multiplier values less than one have been empirically measured, suggesting that certain types of government spending crowd out private investments and spending that would have otherwise happened. The existence of a multiplier effect was initially proposed by Richard Kahn in 1930 and published in 1931.It is particularly associated with Keynesian economics. Some other schools of economic thought reject or downplay the importance of multiplier effects, particularly in terms of the long run. The multiplier effect has been used as an argument for the efficacy of government spending or taxation relief to stimulate aggregate demand. Why does the U.S. rely more on monetary than fiscal policy to manage GDP? U.S. monetary policy affects all kinds of economic and financial decisions people make in this country--whether to get a loan to buy a new house or car or to start up a company, whether to expand a
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Econ exam 4 - Sarah Anderson Econ Exam 4 What is meant by...

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