THE KEYNESIAN MULTIPLIER

The Keynesian Multiplier

The Keynesian Multiplier

Introduction

The economic equilibrium, closed economy as an open economy, is governed by two principles: all production carried out by domestic economic agent's leads to aexpenditure to these agents, all production is divided into income. The variable Y therefore measures both total production and total national income (Heinemann 2009,180). Closed economy, aggregate demand (or aggregate demand) in the economy is sum of consumer spending, investment and government spending. Note AD = C + I + G. Investment is assumed to be constant, public consumption is exogenously controlled by the state

C= 0.8 Y

I= 450

a)

Y= C+ I=0.8 Y+ 450

0.2 Y= 450

Y= ...