This preview shows pages 1–12. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: a=a,T=T,I= I,G=G,X=X Y=a+b(YT)+ I+G+X Solve for Y: YbY=abT+ I+G+X (1b)Y=abT+ I+G+X 7 abT+ I+G+X Y= 1b Government Spending Multiplier: 1 1G 1Y 1 1Y= , = >1 1b 1G 1b 8 1 1 I 1Y 1 1Y= , = >1 1b 1 I 1b Investment Spending Multiplier: Net Exports Multiplier: 1 1X 1Y 1 1Y= , = >1 1b 1X 1b 9 Tax Multiplier: 1b1T 1Yb 1Y= , = <0 1b 1T 1b BalancedBudget Multiplier: 1G=1T 10 ( ) = Gb1T 1Gb1G 1Y= 1b 1b 1b 1G 1Y= 1b 1Y =1 1G Implication: if government purchases rise by a dollar, so does income. 11 Numerical Example Problem: compute the equilibrium level of income, Y. Numerical Values: a=100,b = .75,T=50, I=300,G=50,X=5 12 Y=100+.75(Y50)+300+50+5 (1.75)Y=45550*.75 .25Y=417.5 Y=1670 Value of the Multiplier: 1/(1b)=1/(1.75) = 4...
View
Full
Document
 Winter '08
 Rossana

Click to edit the document details