14Chp20-Econ3310

14Chp20-Econ3310 - Expenditure Multiplier ISLM Model = 1...

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Unformatted text preview: Expenditure Multiplier ISLM Model = 1 1−mpc > 1, the expenditure multiplier = a + mpc × (Y − T ) + I + G mpc × T a+I +G − = 1 − mpc 1 − mpc = C +I +G An increase in government spending leads to an even larger increase in output ∆Y ∆G ⇔Y ⇔Y Y Aggregate demand: Now suppose there is a government, i.e. G > 0 and T > 0. Government’s Role Aggregate Output ...
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