Tuesday, November 18

Expenditure multiplier, Tax multiplier, Balanced budget multiplier

Expenditure (Government Purchase) Multiplier
Increase in government expenditure => workers and captial owners receive wages or payments => increase in aggregate expenditures

Tax Multiplier
Increase in taxes => decrease in income => decrease in consumpton expenditures

Balanced budget multiplier
As expenditure multiplier is stronger than tax multiplier, equal increase in expenditure an tax will lead to increase in GDP.

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