- John Barrdear - http://john.barrdear.com -

The fiscal multiplier

This is mostly for my EC102 students.  There’s been some argument in the academic economist blogosphere over the size of the fiscal multiplier in the USA.  The fiscal multiplier is a measure of by how much GDP rises for an extra dollar of government spending.  There are several main forces in determining it’s size:

Much of what you’ll read arguing for or against a stimulus package will fail to take all of those into account.  People are often defending their personal views on the ideal size of government and so tend to pick-and-choose between the various effects in support of their view.

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#1 Pingback By More on fiscal multipliers | John Barrdear On 30 January 2009 @ 2:13 pm

[…] my previous piece on this, I highlighted that the fiscal multiplier will be different for different ways of […]

#2 Comment By Judy W. Mbugua On 24 February 2009 @ 2:38 pm

I am a student in the school of Economics, Kenyatta University, Kenya. You have very good notes of the fiscal multiplier. How do you calculate for the fiscal multiplier if you are given a model like:

Y=C+I+G+X-M
given that, C=a+bYd
M=m+mYd
Yd=Y-T
and T=t+tY.

Please help.