Tip 1: How to calculate the multiplier
Tip 1: How to calculate the multiplier
In economic theory multiplier - the category used to determine andthe characteristics of relationships, where there is a multiplier effect. The world-famous scientist economist JM. Keynes, the author of macroeconomic theory, called multiplierthe coefficient that characterizes the dependence of changes in income on investment changes.
Instructions
1
According to Keynes's theory, any increaseinvestment, triggers a multiplicative process, which is expressed in an increase in the level of national income by a larger amount than the initial increase in investment. This effect Keynes called the effect multipliera. k (multiplier) = increase in income / increase in investment. From the extreme propensity to save and consume depends the strength of the effect multipliera. If the values of these indicators are relatively constant, then determine multiplier it will not be difficult.
2
To calculate multiplier, suppose that: I - investment; C - consumption; Y - national income; MPS is the ultimate propensity to save, and MPC is the ultimate propensity to consume.
3
Since Y = C + I, the increase in income (Y) will equal, respectively, the sum of the increase in consumption (C) and the increase in investment (I).
4
According to the formula of limiting propensity toconsumption: MPC = C / Y, we get: C = Y * MPC. Put this expression in the equation indicated above (Y = C + I). Get: Y = Y * MPC + I. Hence: Y * (1 - ) = I.
5
Further: income increase Y = (1/1 - MPS) * increase in investment I, but since k = increase Y / increase I, hence increase Y = k * increment I. This means that k = 1/1 - MPS = 1 / MPS, where k - multiplier investment.
6
In this way, multiplier investment - the inverse measure in relation to the marginal propensity to save. The multiplier acts both in the forward direction and in the opposite direction.
Tip 2: How to determine the marginal propensity to consume
In the modern economy, such an indicator as the marginal aptitude to consumption. Its calculation is necessary to determinecountry needs in a particular product. Moreover, the values of the change in costs for the goods, the amount of imports and exports, as well as the total output of products, should be known.
You will need
- - calculator;
- - the amount of change in total costs;
- - the amount of change in imports;
- - the amount of public expenditure;
- - amount of investment;
- - the amount spent for the production of products;
- - the value of the net national product.
Instructions
1
To calculate the limiting propensity to consumption it is necessary to determine the total costs. Summarize the amount spent on consumption of a specific product, investment, government spending and net exports. The last value is found by subtracting the amount of imports from the export amount.
2
Determine the amount of net national product,the value of which must be in equilibrium, that is, the total volume of production is equal to the total expenditure. As a rule, this indicator can be calculated by summing up all expenses among themselves.
3
Determine the value of the multiplier thatindex is calculated by dividing deviation of the net national product (which is obtained by subtracting from the total amount of CSL changes, calculation is performed by subtracting the smaller exponent value greater) change in the amount of total initial expenditure.
4
Limit aptitude to consumption is defined as follows. From the value of the change in total costs of production, subtract the amount of deviation from the net national product. Multiply the result by the sum of the increase (decrease) in the NNP.
5
The ultimate aptitude to consumption should be calculated in order to determinelevel of production. If the total costs are equal or almost equal to the amount of money that is needed to purchase a certain volume of output, then the level of production is equilibrium.
6
Calculation of the marginal propensity to consumption products is required to determine theshare of change in total income. As a rule, the magnitude of the marginal propensity turns out to be less than one. If the limit of the propensity to save is known, then form a proportion from which it will be seen that the quantities are inversely proportional to each other.
Tip 3: What is a tax multiplier
The tax multiplier is a negative coefficient, which shows the change in the national income, depending on the tax changes. The increase in taxes leads to a decrease in the incomes of the population.
The essence of the tax multiplier
In the economy there are so-calledcartoon effects. It occurs when the change in expenditure leads to a greater change in equilibrium GDP. The most famous is Keynes's multiplier. It reflects the extent to which the level of income increases as a result of growth in public and other expenditures. The tax multiplier has less impact on the decrease in demand than the multiplier of government spending on its increase. It has the following effect: with the growth of taxes, the gross national product is reduced, with a decrease - it is growing. It is worth noting that between the change in the tax rate and the national income there is always a time span from several months to a year.The stronger influence of government spending on domestic consumption is due to their direct entry into aggregate demand.How does the tax multiplier work? So, when reducing taxes for the population, consumers have the opportunity to spend more, respectively, they increase their spending on consumer goods. Reduction of the tax burden for entrepreneurs stimulates the growth of investment. The impact of government spending and taxes on the amount of income and consumption is the main factor when choosing the state's instruments of fiscal (fiscal) tax policy. With the priority expansion of the public sector of the economy, costs also increase. This leads to an increase in the income of the population, the production of goods, as well as to a decrease in unemployment. However, such positive effects are achieved only if the increase in government spending is due not only to an increase in the tax burden.
The stronger influence of government spending on domestic consumption is due to the fact that they directly enter into aggregate demand and their changes are reflected in its magnitude.If it is necessary to contain inflationarylifting taxes are increasing. Today, fiscal policy is one of the main means of achieving sustainable, progressive economic development. If government spending and taxes simultaneously increase by the same amount, then equilibrium production will also increase by the same amount. With a balanced budget, the multiplier is always one.
Calculation of tax multiplier
A change in tax policy usually hasthe opportunity to influence the economy in different directions. It is the tax multiplier that allows you to translate the measures of impact into quantitative amounts. It is equal to the ratio of marginal ability to consume to marginal capacity for saving with a minus value. For example, the value of the marginal capacity for consumption is 0.9, and to savings - 0.3. Then the tax multiplier will be -3. Accordingly, the increase in taxes by $ 1 reduces the national income by $ 3. As a multiplier of government spending, the tax multiplier can act in both directions.Tip 4: How to become a multiplier
Paradoxically, this may seem, althoughRussian animation is rightfully considered one of the best in the world, the multipliers in the country are just a few. At the same time there are always a lot of people who want to get this fascinating creative profession.
