ch 13 multiplier effect of an increase in government spending an increase in government spending whether on purchases of goods or services pushes the planned aggregate spending curve up, leading to a rise in equilibrium real GDP. THe rise in real GDP is larger than the rise in gov. spending/purchases of goods and services because rising income leads to a rise in consumer spending too. 1) assuming a constant MPC, an increase in government purchases leads to... 2) an initial rise in aggregate spending... 3) and an induced rise in aggregate spending.
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