25 thoughts on “Fiscal Policy – The Government Spending Multiplier

  1. What about the upward sloping SRAS? If G increase AD, some of those increases are eroded by the upward-sloping SRAS curve. It seems like the AD curve shifts farther right than the size of the gap. Or put another way, you need greater increase in AD to account for the upward sloping SRAS curve. I can't figure that out. Any thoughts?

  2. thank you so much mr Jason you are just sooooooo good. you brought me back to life with my struggles. this is your second video i watched and i feel like i am a professor already

  3. can someone please tell me what is constrained governmet spending in a simple definition plssssss ive been searching for like an hour but got nothing. im in grade 10

  4. The government spending multiplier is mathematical nonsense.
    It's based on Keynes' original government investment multiplier.

    Here are Keynes' original equations,
    with $1 change in government investment: ΔI

    1) ΔY = ΔC + ΔI
    1 = 0 + 1

    2) ΔY = (1/(1-mpc)) ΔI
    0 = (1/(1-mpc)) 0 [Start at delta 0]
    0 = 0 [Multiply]
    1 = 1 [Add]

    ΔY/ΔI = 1/(1-mpc) = 1/1 = 1
    mpc = ΔC/ΔY = 0

    Both equations give the same result.

    You must start at delta 0,
    so you can multiply before adding: P-E-MD-AS

    The marginal propensity to consume, mpc, is irrelevant
    unless you illegally add before multiplying
    in which case you get nonsense:

    2) ΔY = (1/(1-mpc)) ΔI
    0 = (1/(1-0.75)) 0 [Start at delta 0]
    1 = (1/(1-0.75)) 1 [Add]
    1 = 4 [Multiply]
    0 = 3

    You also get $19.5 TRILLION govt debt
    that the government spending multiplier was supposed to pay for.

  5. Freaking out for upcoming exam in 20 days time. your vids helped me more than attending lectures.tq

  6. Have you ever seen this equation: Yt = C+I+NX+G
    It's an equation. Dollars on both sides.
    Add $1 to one side, same happens on the other side:
    Yt + $1 = C+I+NX+G + $1
    No multiplier.
    What you're saying about a "multiplier" is complete NONSENSE.

  7. Say b = mpc, Yt = tot income, C = consump, a = autonomous consump, I = investment, NX = net exports, G = govt spending. 1) Yt = C + I + NX + G 2) Yt = (1/(1-b)) (a+I+NX+G -bT) Add $1 to G in equation 1, and Yt increases $1. No multiplier. Equation 2 is derived from, and can be set equal to equation 1, so it must give the same answer as equation 1. You can't add to G in eq 2. That would illegally put addition 1st in the order of operations. The fiscal "multiplier" is mathematically illegal.

  8. Your question is related to microeconomics, not macro. Therefore, you need to watch the videos in my Market Failure playlist. Click on my name and go to my channel, navigate to "Videos" and then "Playlists". Find unit 1.4 Market Failure and there will be videos there which can help you answer your question!

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