Chapter 10 and 13 REVIEW:

MULTIPLIERS

 

MULTIPLIER

PAGE

LARGER OR SMALLER THAN
THE SIMPLE MULTIPLIER? - WHY?

SIMPLE

pp. 232-234 (19th. 204-208)
"The Multiplier Effect"

multiplier = 1 / mps

Complex multiplier

p. 234 (19th. 207-208)
"How Large is the Actual Multiplier Effect?"

smaller because there are more leakages: (1) saving, (2) spending on imports, and (3) taxes

Multiplier w/ changes
in the price level

pp. 275-278 (19th. 244-248)
"Increases in AD: Demand-Pull Inflation" and "Decreases in AD: Recession and Cyclical Unemployment"

smaller

G spending multiplier

p. 290 (19th. 258)
"Increased Government Spending"
p. 291 (19th. 260)
"Decreased Government Spending"

same as simple

Tax multiplier

p. 290 (19th. 259) "Tax Reductions"
p. 292 (19th. 261) "Increased Taxes"

one less than the simple multiplier, but negative

tax multiplier =MPC / MPS

Bal. Budget multiplier

pp. 290, 292, (19th. 259, 261)
"Combined Gov/t Spending . . . "

always equals 1, WHY?

Multiplier w/ crowding out
(expansionary FP only)

pp. 300, 304-305 (19th. 268, 273)
"Crowding-Out Effect"

smaller

Multiplier with supply-side effects

pp. 300-302 (19th. 269)
"Current Thinking on Fiscal Policy"

larger