ECON 2010 Chapter : Multiplier Effect 3.13.14
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Multiplier effect- an increase in autonomous expenditures, the y intercept/independent variables ( c bar mpc*t + i + g +nx), will lead to a greater increase in y (gdp), such that, How will an increase in autonomous spending due to an increase in government spending affect the. As the figure below shows, increasing the autonomous spending due to an increase in the government spending. This increase leads to a change in the y intercept and thus shifts the entire curve upward by the increase in autonomous spending/government spending. Increase in the y intercept= increase in autonomous spending= increase in government spending= change in autonomous spending. Next, we need to calculate the change in gdp by looking at the intersection points with. The curve labeled one represents the curve before the increase in government spending. The curve labeled one intersects pae=y at gpd1. The curve labeled two represents the curve after the government spending increases.
