[go: up one dir, main page]
Scribd
Upload
92 views24 pages

Keynesian Multiplier and Aggregate Demand

The document discusses the Keynesian multiplier and how it relates to changes in aggregate demand and real GDP. It defines the multiplier as the ratio of the total change in real GDP to the initial change in expenditures. It then explains that the multiplier captures the multiplied effect that an initial change in aggregate demand can have on real GDP through subsequent rounds of spending. A larger multiplier indicates a greater impact on real GDP from any given change in aggregate demand.

Uploaded by

mohdportman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
92 views24 pages

Keynesian Multiplier and Aggregate Demand

The document discusses the Keynesian multiplier and how it relates to changes in aggregate demand and real GDP. It defines the multiplier as the ratio of the total change in real GDP to the initial change in expenditures. It then explains that the multiplier captures the multiplied effect that an initial change in aggregate demand can have on real GDP through subsequent rounds of spending. A larger multiplier indicates a greater impact on real GDP from any given change in aggregate demand.

Uploaded by

mohdportman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Chapter 9: Aggregate Demand and Aggregate supply

Aggregate supply and equilibrium in


the Keynesian model.
The Keynesian Multiplier (HL)
• MULTIPLIER:
• Final increase in real GDP will most likely be
greater than the initial increase in expenditure
Multiplier = Change in RGDP
Initial change in expenditure
Initial change in expenditure = change in real GDP*
Multiplier
As a rule, the multiplier > 1.
Change in real GDP> initial change in expenditure.
• Multiplier is attributed to [Link].
• It is often referred to as the “Keynesian
Multiplier”.
• Whenever there is a change in a component
of AD- there is likely to be a multiplied effect
on real GDP.
• It is important for policy makers who often try
to influence the level of AD in order to affect
the level of real GDP and unemployment.
Understanding the multiplier in terms of
leakages and injections
• The larger the MPC,
smaller the value of
the denominator of the
first fraction, greater is
the multiplier.
• Smaller the S or T or M,
Larger will be the size
of the multiplier.
Calculating the multiplier and its effects
on real GDP
The multiplier, aggregate demand
and real GDP
The effect of the multiplier in relation to
the price level

You might also like