Chapter10new multiplier model
Transcript of Chapter10new multiplier model
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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Chapter 10. The Multiplier Model
Do changes in spending have a larger or smaller effect than might be naively expected?
10A. The Multiplier Model
10B. Determining the Equilibrium Level of Aggregate Income
10C. The Multiplier Model in Action
10D. Fiscal Policy in the Multiplier Model
10E. Limitations of the Multiplier Model
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10A. The Multiplier Model
What does it mean to say that this model is quantitative, and the model in Chapter 9 wan qualitative?
What does the multiplier model assume is fixed or constant?
10A.1. Aggregate Production
10A.2. Aggregate Expenditures
10A.3. Autonomous and Induced Expenditures
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10A.1. Aggregate Production
How do we graph this? In what space?
Why is this shown as a 45 degree line?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10A.2. Aggregate Expenditures
Where have we discussed these components before?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10A.3. Autonomous and Induced Expenditures
What are the two main classes of expenditures?
How do we graph aggregate expenditures?
Which class corresponds to the intercept and which to the slope?
What is the special name for the slope?What is the primary component of that slope?
What causes aggregate expenditures to shift?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10B. Determining the Equilibrium Level of Aggregate
IncomeAre the two lines on the graph showing
possibilities or what really happens?
10B.1. The Multiplier Equation
10B.2. The Multiplier Process
10B.3. The Circular Flow Model and the Intuition behind the Multiplier Process
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10B.1. The Multiplier Equation
What is the formula for the multiplier?
What happens to the multiplier as the MPC changes?
Is MPC likely to change? Through time? Across countries?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10B.2. The Multiplier Process
How do firms recognize that production is “out of line” with income?
How do they respond?
Does that eliminate the problem completely? If not, then what happens?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10B.3. The Circular Flow Model and the Intuition behind the
Multiplier ProcessWhat is another formula for the multiplier
(given in class, not in the text)?
What are injections and leakages, and why are they important?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10C. The Multiplier Model in Action
10C.1. The Steps of the Multiplier Process
10C.2. Examples of the Effects of Shifts in Aggregate Expenditures
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10C.1. The Steps of the Multiplier Process
What happens to the size of the steps as time goes forward?
Where does that progression end? How many steps does that take?
Does the number of steps change as the MPC changes? If not, what does change?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10C.2. Examples of the Effects of Shifts in Aggregate
Expenditures
What is the paradox of thrift (see Chapter 9)?
This is an example of what philosophical problem (not mentioned in the text)?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10D. Fiscal Policy in the Multiplier Model
10D.1. Fighting Recession: Expansionary Fiscal Policy
10D.2. Fighting Inflation: Contractionary Fiscal Policy
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10D.1. Fighting Recession: Expansionary Fiscal Policy
What two tools does the government have to conduct expansionary fiscal policy?
Are there really two shifts in aggregate demand (as shown in Figure 10-10), or is it one big shift that can be broken into two components?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10D.2. Fighting Inflation: Contractionary Fiscal Policy
What two tools does the government have to conduct contractionary fiscal policy?
Are there really two shifts in aggregate demand (as shown in Figure 10-10), or is it one big shift that can be broken into two components?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10E. Limitations of the Multiplier Model
Is anything in economics ever easy? Is that because people’s behavior is difficult to describe?
10D.1. The Multiplier Model Is Not a Complete Model of the Economy
10D.2. Shifts Are Not as Great as Intuition Suggests
10D.3. The Price Level Will Often Change in Response to Shifts in Demand
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10E. Limitations of the Multiplier Model (continued)
10D.4. People’s Forward-Looking Expectations Make the Adjustment Process Much More Complicated
10D.5. Shifts in Expenditures Might Reflect Desired Shifts in Supply and Demand
10D.6. Expenditures Depend on Much More Than Current Income
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10E.1. The Multiplier Model Is Not a Complete Model of the
Economy
What’s missing from the multiplier model?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10E.2. Shifts Are Not as Great as Intuition Suggests
Are autonomous expenditures a broad idea, where we could place just about any change in spending?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10E.3. The Price Level Will Often Change in Response to
Shifts in DemandWhat did we assume was fixed in this model?
If it isn’t fixed, how will the multiplier process change?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10E.4. People’s Forward-Looking Expectations Make the Adjustment Process Much More
Complicated
Does the multiplier model assume that everyone in the chain of expenditures will spend the money?
Why wouldn’t they? What if they don’t?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10E.5. Shifts in Expenditures Might Reflect Desired Shifts in
Supply and DemandIs the definition of autonomous expenditures
consistent with reality?
Could expenditures change in ways that appear autonomous (on the surface), but are really not autonomous?
Dr. Tufte's ECON 2020 PowerPoint slides to accompany Colander's text.
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10E.6. Expenditures Depend on Much More Than Current
IncomeDoes your spending depend on your current income
only?What other form of income does your spending
depend on? Is that form smoother or more volatile than your
current income? Would you always respond in the way described if
you didn’t exclusively focus on current income?