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

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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 ...
View Full Document

Ask a homework question - tutors are online