The Keynesian Expenditures Model and the Spending Multiplier
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How to compute MPC (Marginal Propensity to Consume)
- Change in Consumption
- Change in Income
Formula for Spending Multiplier
How do you calculate change in GDP?
(Change in autonomous spending) * (Spending Multiplier)
C + MPC * Y
What would cause a drop ion autonomous spending?
A drop in consumer confidence
What does the Keynesian notion of a multiplier effect suggest?
Any change in spending can generate a much larger change in output and income
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