In this lesson, our instructor Jibin Park gives an introduction on fiscal policy and the multiplier. He discusses the marginal propensity to consumer, marginal propensity to save, the multiplier effect, consumption function, investment spending, tax multiplier, automatic stabilizers, and the 2008 and 2009 stimulus package.
The MPC stands for the marginal propensity to consume
The MPS stands for the marginal propensity to save
MPS = 1 – MPC
The multiplier formula = 1/(1-MPC)
The consumption function, which shows how an individual household’s consumer spending changes with disposable income, is c = a + MPC x yd
The tax multiplier is (MPC)/(1-MPC)
Government spending has a greater impact than a tax cut in stimulating the economy because individuals tend to save some of their income
Fiscal Policy & The Multiplier
Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.
This book created a 5-step plan to help you study more effectively, use your preparation time wisely, and get your best score. This book includes two full-length practice exams modeled on the real test, all the terms and concepts you need to know to get your best score, and your choice of three customized study schedules.
This book includes an in-depth preparation for both AP economics exams. It features two full-length practice tests, one in Microeconomics and one in Macroeconomics, and all test questions answered and explained. It also features a detailed review of all test topics, which include: supply and demand, theory of consumer choice, economics in the public sector, costs, perfect and imperfect competition, monopolies, labor resources, game theory, the national income and gross domestic product, inflation and unemployment, fiscal policy, money and banking, monetary policy, economic growth, international trade and exchange, interest rate determination, and the market for loanable funds.