BU204_03_Johnson_Jennifer_Unit 6 Homework

290 to me the multiplier attempts to quantify the

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aggregate spending to the size of that autonomous change” (Krugman & Wells, 2009, p. 290). To me the multiplier attempts to quantify the additional effects of a policy beyond those that are immediately measurable. For example, a decrease in taxation will have more of an effect than just the value of the reduced taxes. It will lead to greater disposable income that might cause an increase in consumption, which in turn might increase employment in industries that enjoy greater demand and so on.
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Supply Shocks, both positive and negative “An event that shifts the short-run aggregate supply curve, such as a change in commodity prices, nominal wages, or productivity” (Krugman & Wells, 2009, p. 336). A supply shock is an unexpected event that changes supply availability, causing a corresponding shift in demand and pricing. Supply shocks can be positive; meaning an increase of supplies is available, or negative, with a decrease in availability. In both cases, they can sometimes cause a ripple effect in the economy if the supply in question is a key component of the economy. An example of this is if there was a sudden change in the availability of oil
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