Top

Published in:

2017 | OriginalPaper | Chapter

11. Expenditure Multipliers

Author : Karl Seeley

Published in: Macroeconomics in Ecological Context

Publisher: Springer International Publishing

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

We extend the mill parable of Chap. 9 to develop some intuition about how expenditure multipliers work, as well as conditions under which thy’re more or less likely to be relevant. This covers both physical inability and simple unwillingness to increase output. We then derive the conventional Keynesian multipliers for changes in expenditure and taxation. The informal version from the mill parable is used to introduce some limitations of multiplier analysis.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

previous chapter Banking

next chapter Monetary Policy

Keep in mind that a farmer’s “income” here is how much food she produces, not her revenue. Let’s say she accepts tokens in payment of food but she doesn’t increase her output nor does she decrease her consumption, opting instead to use the tokens to buy the extra food from someone else. (This is the situation of Problem 9.2.) Her income in that case is unchanged (Δ y = 0). Her revenue has increased, but her expenditure has increased an equal amount.

If you’re familiar with the concept of limits, you can approach the problem that way. What happens as Δ y gets smaller and smaller, heading towards zero? That is, what’s the limit of μ as Δ y → 0? The term Δ c in this case is negative, which means that Δ c∕Δ y becomes a larger and larger negative number, approaching −∞. That implies that 1 −Δ c∕Δ y becomes an ever larger positive number, approaching ∞, and the multiplier in turn is approaching 1∕∞, which is the same as approaching 0. You can also revert to Eq. 11.1, where there’s no problem with Δ y = 0 and we can directly calculate that μ = 0.

Title: Expenditure Multipliers
Author: Karl Seeley
Publisher: Springer International Publishing
Book: Macroeconomics in Ecological Context
Print ISBN: 978-3-319-51755-1

Electronic ISBN: 978-3-319-51757-5

Copyright Year: 2017
DOI: https://doi.org/10.1007/978-3-319-51757-5_11