Multipliers

Chapter 11 REVIEW:

MULTIPLIERS

MULTIPLIER

PAGE

LARGER OR SMALLER THAN
THE SIMPLE MULTIPLIER? - WHY?

SIMPLE

p. 158-161 "The Multiplier Effect"

multiplier = 1 / mps

Complex multiplier

p. 162
"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

p. 162 "How Large is the Actual Multiplier Effect?"

smaller

G spending multiplier

p. 209 "Increased Government Spending"
p. 211 "Decreased Government Spending"

same as simple

Tax multiplier

p. 210 "Tax Reductions"
p. 211 "Increased Taxes"

one less than the simple multiplier, but negative

tax multiplier =MPC / MPS

Bal. Budget multiplier

p. 210, 211 "Combined Gov/t Spending . . . "

always equals 1, WHY?

Multiplier w/ crowding out
(expansionary FP only)

p. 217-218 "Crowding-Out Effect"

smaller

Multiplier with supply-side effects

pp. 295-299 "Taxation and Aggregate Supply"

pp. 218 "Current Thinking on Fiscal Policy"

larger

MULTIPLIER	PAGE	LARGER OR SMALLER THAN THE SIMPLE MULTIPLIER? - WHY?
SIMPLE	p. 158-161 "The Multiplier Effect"	multiplier = 1 / mps
Complex multiplier	p. 162 "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	p. 162 "How Large is the Actual Multiplier Effect?"	smaller
G spending multiplier	p. 209 "Increased Government Spending" p. 211 "Decreased Government Spending"	same as simple
Tax multiplier	p. 210 "Tax Reductions" p. 211 "Increased Taxes"	one less than the simple multiplier, but negative tax multiplier =MPC / MPS
Bal. Budget multiplier	p. 210, 211 "Combined Gov/t Spending . . . "	always equals 1, WHY?
Multiplier w/ crowding out (expansionary FP only)	p. 217-218 "Crowding-Out Effect"	smaller
Multiplier with supply-side effects	pp. 295-299 "Taxation and Aggregate Supply" pp. 218 "Current Thinking on Fiscal Policy"	larger