Subject category:
Strategy and General Management
Published by:
Darden Business Publishing
Version: 10.2002
Length: 6 pages
Data source: Generalised experience
Abstract
The objective of this note is to provide an overview of fiscal policy tools and how fiscal policy influences GDP through the income multiplier. The mechanics behind the income multiplier are explained and an algebraic derivation is provided. The note also provides examples of how parameters associated with disposable income like the tax rate and marginal propensity to consumer influence the magnitude of the income multiplier.
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Abstract
The objective of this note is to provide an overview of fiscal policy tools and how fiscal policy influences GDP through the income multiplier. The mechanics behind the income multiplier are explained and an algebraic derivation is provided. The note also provides examples of how parameters associated with disposable income like the tax rate and marginal propensity to consumer influence the magnitude of the income multiplier.
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