aggregate expenditures: the multiplier, net exports, and government chapter ten
TRANSCRIPT
![Page 1: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/1.jpg)
Aggregate Aggregate Expenditures:Expenditures:
The Multiplier, The Multiplier, Net Exports, Net Exports,
and and GovernmentGovernment
CHAPTER TEN
![Page 2: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/2.jpg)
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
Pri
va
te s
pe
nd
ing
(b
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Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
2020Ig0
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
Equilibrium GDPEquilibrium GDPat at IIg0g0 level of investment level of investment
S
(C + Ig ) 0
![Page 3: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/3.jpg)
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
Pri
va
te s
pe
nd
ing
(b
illi
on
s o
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Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
2020Ig0
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
Equilibrium GDPEquilibrium GDPat at IIg0g0 level of investment level of investment
S
(C + Ig ) 0
If I If I gg
increases...increases...
![Page 4: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/4.jpg)
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
Pri
va
te s
pe
nd
ing
(b
illi
on
s o
f d
oll
ars
)S
av
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an
d i
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(bil
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of
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o
o45
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(C + Ig ) 1
Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
2020Ig0
Ig1
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
Equilibrium GDPEquilibrium GDPat at IIg1g1 level of investment level of investment
S
(C + Ig ) 0
![Page 5: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/5.jpg)
Pri
vate
sp
end
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(b
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of
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)S
avin
g a
nd
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stm
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(bill
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Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
2020 Ig0
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
Equilibrium GDPEquilibrium GDPat at IIg0g0 level of investment level of investment
(C + Ig ) 0
S
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
If I If I gg
decreases...decreases...
![Page 6: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/6.jpg)
Pri
vate
sp
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(b
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of
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avin
g a
nd
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stm
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(bill
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(C + Ig ) 2
Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
2020 Ig0
Ig2
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
Equilibrium GDPEquilibrium GDPat at IIg2g2 level of investment level of investment
(C + Ig ) 0
S
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
CHANGES IN EQUILIBRIUM GDPAND THE MULTIPLIER
![Page 7: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/7.jpg)
THE MULTIPLIER EFFECTTHE MULTIPLIER EFFECTTHE MULTIPLIER EFFECTTHE MULTIPLIER EFFECT
Multiplier Multiplier ==change in real GDPchange in real GDP
initial change in spendinginitial change in spending
OROR
Change in GDPChange in GDP == Multiplier Multiplier xx initial changeinitial changein spendingin spending
Rationale - $ spent in the economy is earned by others as income.Others go and spend part of their income and so on, and so on…
![Page 8: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/8.jpg)
Change in GDPChange in GDP == Multiplier Multiplier xx initial changeinitial changein spendingin spending
and the marginal propensities....and the marginal propensities....
Inverse relationship betweenInverse relationship betweenMultiplier & MPSMultiplier & MPS
SimplifiedSimplifiedMultiplier Multiplier
== OROR11
MPSMPS11
1 - MPC1 - MPC
THE MULTIPLIER EFFECTTHE MULTIPLIER EFFECTTHE MULTIPLIER EFFECTTHE MULTIPLIER EFFECT
How much will a dollar spent, not saved have an impact on the economy?
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The Multiplier EffectThe Multiplier Effect• The multiplier helps us
understand that spending changes are magnified when applied to the economy.
• This is especially important for fiscal policy considerations!
• The complex multiplier current being applied by the President is 2.
• Remember the simple multiplier only takes into effect the leakage of savings.
• Complex takes into effect taxes and imports.
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INTERNATIONAL TRADE INTERNATIONAL TRADE EQUILIBRIUM OUTPUTEQUILIBRIUM OUTPUT
INTERNATIONAL TRADE INTERNATIONAL TRADE EQUILIBRIUM OUTPUTEQUILIBRIUM OUTPUT
NET EXPORTSNET EXPORTSNET EXPORTSNET EXPORTS
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INTERNATIONAL TRADE INTERNATIONAL TRADE EQUILIBRIUM OUTPUTEQUILIBRIUM OUTPUT
INTERNATIONAL TRADE INTERNATIONAL TRADE EQUILIBRIUM OUTPUTEQUILIBRIUM OUTPUT
NET EXPORTSNET EXPORTSNET EXPORTSNET EXPORTS
PositivePositive if exports > imports if exports > imports
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INTERNATIONAL TRADE INTERNATIONAL TRADE EQUILIBRIUM OUTPUTEQUILIBRIUM OUTPUT
INTERNATIONAL TRADE INTERNATIONAL TRADE EQUILIBRIUM OUTPUTEQUILIBRIUM OUTPUT
NET EXPORTSNET EXPORTSNET EXPORTSNET EXPORTS
PositivePositive if exports > imports if exports > imports
NegativeNegative if imports > exports if imports > exports
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INTERNATIONAL TRADE INTERNATIONAL TRADE EQUILIBRIUM OUTPUTEQUILIBRIUM OUTPUT
INTERNATIONAL TRADE INTERNATIONAL TRADE EQUILIBRIUM OUTPUTEQUILIBRIUM OUTPUT
NET EXPORTSNET EXPORTSNET EXPORTSNET EXPORTSPositivePositive if exports > imports if exports > imports
NegativeNegative if imports > exports if imports > exports
Now C + I + (x-m) orNow C + I + (x-m) orC + I + XC + I + X n
g
g
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INTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUT
Pri
vate
sp
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Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
+5+5
-5-5
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
C + Ig
Equilibrium GDP atEquilibrium GDP atnet export = 0 net export = 0 levellevel
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INTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUT
Pri
vate
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Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
+5+5
-5-5
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
C + Ig
Equilibrium GDP atEquilibrium GDP atnet export = 0 net export = 0 levellevel
ToToillustrateillustrate
positivepositive net netexportsexports
![Page 16: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/16.jpg)
INTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUT
Pri
vate
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Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
+5+5
-5-5
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
C + Ig
Equilibrium GDP atEquilibrium GDP atpositive net export positive net export
level Xlevel Xn1n1
Xn1
C + Ig + Xn1
![Page 17: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/17.jpg)
INTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUT
Pri
vate
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Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
+5+5
-5-5
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
C + Ig
Equilibrium GDP atEquilibrium GDP atnet export = 0 net export = 0 levellevel
ToToillustrateillustrate
negativenegative net netexportsexports
![Page 18: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/18.jpg)
INTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUTINTERNATIONAL TRADE EQUILIBRIUM OUTPUT
Pri
vate
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Real domestic product, GDP (billions of dollars)
510510
490490
470470
450450
430430
Real domestic product, GDP (billions of dollars)
+5+5
-5-5
430 450 470 490 510430 450 470 490 510
430 450 470 490 510430 450 470 490 510
C + Ig
Xn2
Equilibrium GDP atEquilibrium GDP atnegative net exportnegative net export
level Xlevel Xn2n2
C + Ig + Xn2
![Page 19: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/19.jpg)
International Economic International Economic Linkages…These shift Linkages…These shift the net export curve.the net export curve.
International Economic International Economic Linkages…These shift Linkages…These shift the net export curve.the net export curve.
• Prosperity AbroadProsperity Abroad• Prosperity AbroadProsperity AbroadThe more prosperous our trading partners are we will likely seean increase in exports.
![Page 20: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/20.jpg)
International Economic International Economic Linkages...Linkages...International Economic International Economic Linkages...Linkages...
• Prosperity AbroadProsperity Abroad
• TariffsTariffs
• Prosperity AbroadProsperity Abroad
• TariffsTariffsTariffs imposed by other countries on our products will reduce ourExports.
![Page 21: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/21.jpg)
International Economic International Economic Linkages...Linkages...International Economic International Economic Linkages...Linkages...
• Prosperity AbroadProsperity Abroad•TariffsTariffs• Exchange RatesExchange Rates
• Prosperity AbroadProsperity Abroad•TariffsTariffs• Exchange RatesExchange Rates
Depreciation of the $ will cause exports to increase. We alsoWon’t buy as many imports as they will be more expensive.
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ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTOR
o45
o
Real domestic product, GDP (billions of dollars)
5050
3030
00
470 510 550470 510 550
C + Ig + Xn
Real domestic product, GDP (billions of dollars)470 510 550470 510 550
C
Ig + X
S+M
C +
I g +
Xn +
G(b
illi
on
s o
f d
oll
ars)
Sa+
M+
T, I
g +
X +
G(b
illio
ns
of
do
llars
)
Show the effect ofShow the effect ofgovernment spendinggovernment spending
![Page 23: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/23.jpg)
ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTOR
o45
o
Real domestic product, GDP (billions of dollars)
5050
3030
00
470 510 550470 510 550
C + Ig + Xn + G
Equilibrium GDPEquilibrium GDPafterafter $20 billion $20 billion
government spendinggovernment spending
C + Ig + Xn
Real domestic product, GDP (billions of dollars)470 510 550470 510 550
C
Ig + XIg + X + G
S+M
Governmentspending
$20 billion
Government spending $20 billion
C +
I g +
Xn +
G(b
illi
on
s o
f d
oll
ars)
Sa+
M+
T, I
g +
X +
G(b
illio
ns
of
do
llars
)
![Page 24: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/24.jpg)
C +
I g +
Xn +
G(b
illi
on
s o
f d
oll
ars)
Sa+
M+
T, I
g +
X +
G(b
illio
ns
of
do
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)
o45
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Real domestic product, GDP (billions of dollars)
5050
3030
00
490 550490 550
C + Ig + Xn + G
Impact of taxes onImpact of taxes onequilibrium GDPequilibrium GDP
Real domestic product, GDP (billions of dollars)
Ig + XIg + X + G
S+M
$15 billiondecrease in
consumption
490 550490 550
$20 billion increasein taxes
ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTOR
![Page 25: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/25.jpg)
C +
I g +
Xn +
G(b
illi
on
s o
f d
oll
ars)
Sa+
M+
T, I
g +
X +
G(b
illio
ns
of
do
llars
)
o45
o
Real domestic product, GDP (billions of dollars)
5050
3030
00
490 550490 550
C + Ig + Xn + G
Impact of taxes onImpact of taxes onequilibrium GDPequilibrium GDP
Real domestic product, GDP (billions of dollars)
Ig + XIg + X + G
S+M
$15 billiondecrease in
consumption
490 550490 550
$20 billion increasein taxes
ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTOR
Toillustrate a
$20 billion taxincrease
Toillustrate a
$20 billion taxincrease
Lump-Sum TaxesLump-Sum Taxes
![Page 26: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/26.jpg)
C +
I g +
Xn +
G(b
illi
on
s o
f d
oll
ars)
Sa+
M+
T, I
g +
X +
G(b
illio
ns
of
do
llars
)
o45
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Real domestic product, GDP (billions of dollars)
5050
3030
00
490 550490 550
C + Ig + Xn + G
Impact of taxes onImpact of taxes onequilibrium GDPequilibrium GDP
Real domestic product, GDP (billions of dollars)
Ig + XIg + X + G
S+M
$15 billiondecrease in
consumption
$5 billion decreasein saving
490 550490 550
Sa+MSa+M+T
Ca + Ig + Xn + G
$20 billion increasein taxes
ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTOR
![Page 27: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/27.jpg)
C +
I g +
Xn +
G(b
illi
on
s o
f d
oll
ars)
Sa+
M+
T, I
g +
X +
G(b
illio
ns
of
do
llars
)
o45
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Real domestic product, GDP (billions of dollars)
5050
3030
00
490 550490 550
C + Ig + Xn + G
Impact of taxes onImpact of taxes onequilibrium GDPequilibrium GDP
Real domestic product, GDP (billions of dollars)
Ig + XIg + X + G
S+M
$15 billiondecrease in
consumption
$5 billion decreasein saving
490 550490 550
Sa+MSa+M+T
Ca + Ig + Xn + G
$20 billion increasein taxes
ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTOR
BalancedBalancedBudgetBudget
MultiplierMultiplier
![Page 28: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/28.jpg)
Real GDP (billions of dollars)
o45
o
490 510 530490 510 530
(C + Ig + Xn + G)0
Full EmploymentPri
vate
an
d g
ove
rnm
ent
spen
din
g (
bil
lio
ns
of
do
llar
s)
Recessionary gap - Whenaggregate expendituresare inadequate to bringabout full employment
Recessionary gap - Whenaggregate expendituresare inadequate to bringabout full employment
ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTOR
![Page 29: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/29.jpg)
Real GDP (billions of dollars)
(C + Ig + Xn + G)1
o45
o
490 510 530490 510 530
(C + Ig + Xn + G)0
Full Employment
} RecessionaryRecessionaryGap = $5 billion Gap = $5 billion
Pri
vate
an
d g
ove
rnm
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spen
din
g (
bil
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of
do
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Recessionary gap - Whenaggregate expendituresare inadequate to bringabout full employment
Recessionary gap - Whenaggregate expendituresare inadequate to bringabout full employment
ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTOR
![Page 30: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/30.jpg)
Real GDP (billions of dollars)
o45
o
490 510 530490 510 530
Full EmploymentPri
vate
an
d g
ove
rnm
ent
spen
din
g (
bil
lio
ns
of
do
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ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORInflationary gap - Whenaggregate expendituresare greater than the full
employment level causingdemand-pull inflation
Inflationary gap - Whenaggregate expendituresare greater than the full
employment level causingdemand-pull inflation
(C + Ig + Xn + G)0
![Page 31: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/31.jpg)
Real GDP (billions of dollars)
o45
o
490 510 530490 510 530
(C + Ig + Xn + G)0
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ADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTORADDING THE PUBLIC SECTOR
(C + Ig + Xn + G)1
{ InflationaryGap = $5 billion
InflationaryGap = $5 billion
Inflationary gap - Whenaggregate expendituresare greater than the full
employment level causingdemand-pull inflation
Inflationary gap - Whenaggregate expendituresare greater than the full
employment level causingdemand-pull inflation
![Page 32: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/32.jpg)
Historical Applications...Historical Applications...• Great DepressionGreat Depression
![Page 33: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/33.jpg)
Historical Applications...Historical Applications...• Great DepressionGreat Depression• Overcapacity & Business Overcapacity & Business
IndebtednessIndebtedness
![Page 34: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/34.jpg)
Historical Applications...Historical Applications...• Great DepressionGreat Depression• Overcapacity & Business Overcapacity & Business
IndebtednessIndebtedness• Decline in Residential Decline in Residential
ConstructionConstruction
![Page 35: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/35.jpg)
Historical Applications...Historical Applications...• Great DepressionGreat Depression• Overcapacity & Business Overcapacity & Business
IndebtednessIndebtedness• Decline in Residential Decline in Residential
ConstructionConstruction• Stock Market CrashStock Market Crash
![Page 36: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/36.jpg)
Historical Applications...Historical Applications...• Great DepressionGreat Depression• Overcapacity & Business Overcapacity & Business
IndebtednessIndebtedness• Decline in Residential Decline in Residential
ConstructionConstruction• Stock Market CrashStock Market Crash• Shrinking Money SupplyShrinking Money Supply
![Page 37: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/37.jpg)
Historical Applications...Historical Applications...• Great DepressionGreat Depression• Overcapacity & Business Overcapacity & Business
IndebtednessIndebtedness• Decline in Residential Decline in Residential
ConstructionConstruction• Stock Market CrashStock Market Crash• Shrinking Money SupplyShrinking Money Supply
• Vietnam War InflationVietnam War Inflation
![Page 38: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/38.jpg)
![Page 39: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/39.jpg)
•Recessionary gapRecessionary gap•Inflationary gapInflationary gap•Multipliers: Simple, Multipliers: Simple, Tax, and balanced-Tax, and balanced-budget multiplierbudget multiplier
•Lump-sum taxLump-sum tax
•Recessionary gapRecessionary gap•Inflationary gapInflationary gap•Multipliers: Simple, Multipliers: Simple, Tax, and balanced-Tax, and balanced-budget multiplierbudget multiplier
•Lump-sum taxLump-sum tax
![Page 40: Aggregate Expenditures: The Multiplier, Net Exports, and Government CHAPTER TEN](https://reader035.vdocuments.net/reader035/viewer/2022062322/5697c0251a28abf838cd5059/html5/thumbnails/40.jpg)
Coming Next:Coming Next:Coming Next:Coming Next:
AGGREGATE DEMANDAGGREGATE DEMANDANDAND
AGGREGATE SUPPLYAGGREGATE SUPPLY
AGGREGATE DEMANDAGGREGATE DEMANDANDAND
AGGREGATE SUPPLYAGGREGATE SUPPLYCHAPTER 11CHAPTER 11CHAPTER 11CHAPTER 11