15Chp20-Econ3310

15Chp20-Econ3310 - = a+I +G mpc × T − 1 − mpc 1 −...

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Unformatted text preview: = a+I +G mpc × T − 1 − mpc 1 − mpc Expenditure Multiplier 1 mpc ∆G − ∆T 1 − mpc 1 − mpc = ∆G = Keynes’ suggestion to fight recessions was to increase government expenditure. Higher G still raises output. ∆Y ∆Y The change in output is Suppose the government needs raise taxes to finance the increase in G, i.e. ∆G = ∆T Y Aggregate demand: Government’s Role Aggregate Output ISLM Model ...
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