宏观经济学---曼昆chap10.pptVIP

* * * Explain why the vertical distance of the shift in the E curve equals ?G: At any value of Y, an increase in G by the amount ?G causes an increase in E by the same amount. At Y1, there is now an unplanned depletion of inventories, because people are buying more than firms are producing (E Y). * * The textbook defines the multiplier as the increase in income resulting from a $1 increase in G. However, G is a real variable (as is Y ). So, if you wish to be more precise, then you might consider defining the multiplier as “the increase in income resulting from a one-unit increase in G.” * Students are better able to understand this if given a more concrete example, which you can explain as you display the elements on this slide. For instance, Suppose the government spends an additional $100 million on defense. Then, the revenues of defense firms increase by $100 million, all of which becomes income to somebody: some of it is paid to the workers and engineers and managers, the rest is profit paid as dividends to shareholders. Hence, income rises $100 million (?Y = $100 million = ?G ). The people whose income just rose by $100 million are also consumers, and they will spend the fraction MPC of this extra income. Suppose MPC = 0.8, so C rises by $80 million. To be concrete, suppose they buy $80 million worth of Ford Explorers. Then, Ford sees its revenues increase by $80 million, all of which becomes income to somebody - either Ford’s workers, or its shareholders  (?Y = $80 million). And what do these folks do with this extra income? They spend the fraction MPC (0.8) of it, causing ?C = $64 million (8/10 of $80 million). Suppose they spend all $64 million on Hershey’s chocolate bars, the ones with the bits of mint cookie inside. Then, Hershey Foods Corporation experiences a revenue increase of $64 million, which becomes income to somebody or other. (?Y = $64 million). So far, the total impact on income is $100 million + $80 million +