When there is a shock to the economy, it is generally thought to have a multiplied effect on the economy. Some households enjoy higher income, they spend it, increasing the income for other households, who in turn spend it, and so on. The size of the multiplier is finite because there are leakages: some of the increase in income may be saved, used to pay taxes, or used to buy imports, and is therefore not available as income to others.
How big are these multipliers? Menzie Chinn provides some estimates at Econbrowser.
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4 comments:
Dear Professor,
Can you please continue to write your views in this blog?
This is because it allows me to contunally learn from you after the MacroEconomics course (with no additional fees as well) :)
I'm taking a brief break over Christmas.... I hope to start posting again (although maybe less frequently) in the new year.
Many thanks for the good news!
Merry Christmas and Happy New Year!! :)
The sun will come out, tomorrow! Bet your bottom dollar that TOMORROW ... there'll be SUNSHINE!
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