Im a little confused when videos say the multiplier was developed by Keyenes when even Keynes himself identifies the originator of the multiplier as Richard Kahn in “The Relation of Home Investment to Unemployment” . I know this is how a level is taught but it seems like a strange simplification which just gives more credit to Keynes
Savings are either a "leakage" or go to the financial institutions (which they usually do). If they go to financial institutions (as you assume first) you can not call that a leakage (as you do immediately after)...
Yes that's why it is called multiplier effect. It makes your initial national income much bigger due to the injections(investments,exports,government expenditure on goods and services) inserted into the circular flow of income. You can also use: k=1/MPS+MPM+MPT OR k=1/(1-MPC) OR k=1/MPW where, k is the size/magnitude of the multiplier MPS:marginal propensity to save(change in savings due to change in national income) MPM: marginal propensity to import(change in import expenditure due to change in national income) MPT:marginal propensity to tax(change in tax revenue collected due to change in national income) MPC:marginal propensity to consume/spend(change in consumption due to change in national income)-aka induced consumption MPW:marginal propensity to withdraw(change in all withdrawals due to change in national income)---this is also the sum of the MPS,MPM and MPT
If firms invest more, this potentially create more gobs and then peaple who had been employed earn a salary which the should spend....when individuals are getting salaries...this increase their purchasing power compared to when they were unemployed which increase aggregate demand in the economy....in addition this will cause firms to produce more outputs in order to meet all the demand which directly cause the GDP to increase. This is also mainly one of the main reason why government spend in an economy, that is, to expect economy growth throught an increase in GDP
someone explain how monetray policy of lower intrest rates leads to infaltion
3 роки тому+1
Easy. Money has.a cost. If I borrow $100 from you, you should expect something in return for the risk you are shouldering - I might not pay you back; and something for the inconvenience - you don't have the $100 to spend if you should need it. So I agree to pay you back after one year the $100 _plus_ $5 for your trouble. Summary: money has a cost. Now... The lower your interest rates, the less it's going to cost me. Summary: lower interest rates = cheaper money. I would probably buy a house if your interest rate is 1% but if you charge me 50% - no way. The house would end up costing me 50% more which is too expensive and I couldn't afford it any way. Summary: cheaper money leads to more purchasing. Now if there's 10 house's available but only one person buying then the buyer gets his choice. But if there are 1,000 people trying to buy then prices are going to go up - it's a sellers market! Summary: more purchasing leads to inflation. Review: Money has a cost (interest rate) -> lower interest rate is cheaper money -> cheaper money leads to more purchasing -> more purchasing leads to inflation Summary: Lower interest rates implies inflation
www.economicsonline.co.uk/Managing_the_economy/The_multiplier_effect.html Maybe this will help u understand better:) I am not an econs expert, just a student but this is what i think: Since the government tends to be the one implementing taxes on businesses and households, this will cause the marginal propensity to consume(MPC) to decrease as lesser money is diverted to spending, resulting in withdrawals and hence the multiplier decreases. you can use this formula to understand the factors affecting the multiplier better: k=1/MPS+MPM+MPT OR k=1/(1-MPC) OR k=1/MPW where, MPS:marginal propensity to save(change in savings due to change in national income) MPM: marginal propensity to import(change in import expenditure due to change in national income) MPT:marginal propensity to tax(change in tax revenue collected due to change in national income) MPC:marginal propensity to consume/spend(change in consumption due to change in national income)-aka induced consumption MPW:marginal propensity to withdraw(change in all withdrawals due to change in national income)---this is also the sum of the MPS,MPM and MPT hope this helps. have a nice day:)
You might need to learn this for an exam but be aware that it's broken. Keynesian economics is broken. Here's what's wrong... 1/ at 1:00 we are informed that any money saved: the savings, is put back to work in the real economy 2/ at 1:27 we are told the opposite, that savings are removed from the economy and is labelled "leakage" The base assumption used for the rest of the argument is 2/ but this is false. In reality 1/ is correct - banks put savings back to work within seconds of it being received. Any confusion is quickly covered up with clever math. The only justification for 2/ would be if people kept all of their money under their mattresses - they don't.
This is good but it is simplistic in that in a Fiat Currency Country e.g. USA, UK, Australia, China, Russia, Japan etc , borrowing is NOT funded by deposits, it is funded by banks and governments printing money - look up Modern Monetary Theory.
This theory is garbage. When you save money it doesn't vanish. You just put it aside for a while and then spend, so you have an infinite consumer spending in the long run according to this nonsense model. In fact, when the money supply increases by, for example, 1 000 $ it takes time for all goods to be expressed in new prices as a result of higher demand. So, the multiplier effect is basically the rise in prices of all goods and services rather than an increase in price of a good on which the initial higher supply of money was spent.
So much clearer than the Khan Academy presentation! Thank you!
Khan Academy method is confusing though
such an awesome video! its sad there are only 3 videos on your channel. pls pls create more!!:)
Brilliant video with really clear explanation. Thanks
thank you this video really helped me a lot..
So helpful! Thank you.
Im a little confused when videos say the multiplier was developed by Keyenes when even Keynes himself identifies the originator of the multiplier as Richard Kahn in “The Relation of Home Investment to Unemployment” . I know this is how a level is taught but it seems like a strange simplification which just gives more credit to Keynes
Developed means taken to the next level but not the original creator
stupid
Thank you sooo much!!! Video was really helpful.
Too much clearity👍 thank you
Thank you for making this video it was very helpful
Great video, easy for understanding
Really helpful to me .. thanqq...🤗 N God bless you
Thank you! i fell asleep throught this part in the chapter because it was so confusing to read. thanks again!
Thank you so much!!! I love you
If the government decreased spending by 10bn would the effect still be 25bn but less instead of more?
Thank you've teach me cash flow in 1 minutes
How do you predict MPC and MPS? How do you get into the heads of millions of individual consumers and their unique circumstances and psychology?
Thank you very much for this video
Thank you so much for this, it was really helpful!
Thank you for this I would like to follow your presentation
useful video.... i like it
Thank u!!
thank you!!!
Savings are either a "leakage" or go to the financial institutions (which they usually do). If they go to financial institutions (as you assume first) you can not call that a leakage (as you do immediately after)...
How does the money and individual saves is used in institutions? Isn't it the personal bank statement?
Thanks it is a super short video
Damn! Useful.
thankyouuuuu very clear
can someone tell me what dose it mean If the initial government value was 25b? like what do we do with the number, what does it show?
Thanks
Look at Venezuela and Argentina, that’s keynes right there
keep it up !
I didn’t get it quite well, does it mean that the 10b$ become 25b$, or some imagery effect that actual doesn’t happen
Girl it took me forever so the formula is MPC= 1/1-0.6=0.4 = 1/0.4=2.5
Yes that's why it is called multiplier effect. It makes your initial national income much bigger due to the injections(investments,exports,government expenditure on goods and services) inserted into the circular flow of income.
You can also use:
k=1/MPS+MPM+MPT OR k=1/(1-MPC) OR k=1/MPW
where, k is the size/magnitude of the multiplier
MPS:marginal propensity to save(change in savings due to change in national income)
MPM: marginal propensity to import(change in import expenditure due to change in national income)
MPT:marginal propensity to tax(change in tax revenue collected due to change in national income)
MPC:marginal propensity to consume/spend(change in consumption due to change in national income)-aka induced consumption
MPW:marginal propensity to withdraw(change in all withdrawals due to change in national income)---this is also the sum of the MPS,MPM and MPT
@@thatperson8741 how does my initial national income becomes bigger? do you mean the government? bc it's impossible to get 25b.
Why economy so complicated geez, and its also useless for me...really regret to choose this course
Same In AP Macroecon and Im not even going to college, Im doing welding 💀
tomorrow my final today im study, :)
The importance of investments for a countries GDP
If firms invest more, this potentially create more gobs and then peaple who had been employed earn a salary which the should spend....when individuals are getting salaries...this increase their purchasing power compared to when they were unemployed which increase aggregate demand in the economy....in addition this will cause firms to produce more outputs in order to meet all the demand which directly cause the GDP to increase. This is also mainly one of the main reason why government spend in an economy, that is, to expect economy growth throught an increase in GDP
thankyou
Which software use for animation
Powtoon
someone explain how monetray policy of lower intrest rates leads to infaltion
Easy. Money has.a cost. If I borrow $100 from you, you should expect something in return for the risk you are shouldering - I might not pay you back; and something for the inconvenience - you don't have the $100 to spend if you should need it. So I agree to pay you back after one year the $100 _plus_ $5 for your trouble. Summary: money has a cost.
Now... The lower your interest rates, the less it's going to cost me. Summary: lower interest rates = cheaper money.
I would probably buy a house if your interest rate is 1% but if you charge me 50% - no way. The house would end up costing me 50% more which is too expensive and I couldn't afford it any way. Summary: cheaper money leads to more purchasing.
Now if there's 10 house's available but only one person buying then the buyer gets his choice. But if there are 1,000 people trying to buy then prices are going to go up - it's a sellers market! Summary: more purchasing leads to inflation.
Review: Money has a cost (interest rate)
-> lower interest rate is cheaper money
-> cheaper money leads to more purchasing
-> more purchasing leads to inflation
Summary: Lower interest rates implies inflation
What happens to the multiplier when an economy moves from a small closed economy with the government to an open
www.economicsonline.co.uk/Managing_the_economy/The_multiplier_effect.html
Maybe this will help u understand better:)
I am not an econs expert, just a student but this is what i think:
Since the government tends to be the one implementing taxes on businesses and households, this will cause the marginal propensity to consume(MPC) to decrease as lesser money is diverted to spending, resulting in withdrawals and hence the multiplier decreases.
you can use this formula to understand the factors affecting the multiplier better:
k=1/MPS+MPM+MPT OR k=1/(1-MPC) OR k=1/MPW
where,
MPS:marginal propensity to save(change in savings due to change in national income)
MPM: marginal propensity to import(change in import expenditure due to change in national income)
MPT:marginal propensity to tax(change in tax revenue collected due to change in national income)
MPC:marginal propensity to consume/spend(change in consumption due to change in national income)-aka induced consumption
MPW:marginal propensity to withdraw(change in all withdrawals due to change in national income)---this is also the sum of the MPS,MPM and MPT
hope this helps. have a nice day:)
❤
🙏
cheers mate, you sound Australian
Thank you!! (^_^ )
only MPS i care about is the car
mullllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
You might need to learn this for an exam but be aware that it's broken. Keynesian economics is broken.
Here's what's wrong...
1/ at 1:00 we are informed that any money saved: the savings, is put back to work in the real economy
2/ at 1:27 we are told the opposite, that savings are removed from the economy and is labelled "leakage"
The base assumption used for the rest of the argument is 2/ but this is false. In reality 1/ is correct - banks put savings back to work within seconds of it being received. Any confusion is quickly covered up with clever math. The only justification for 2/ would be if people kept all of their money under their mattresses - they don't.
This is good but it is simplistic in that in a Fiat Currency Country e.g. USA, UK, Australia, China, Russia, Japan etc , borrowing is NOT funded by deposits, it is funded by banks and governments printing money - look up Modern Monetary Theory.
True and that's not the only simplification the video makes, its just bit sad
This theory is garbage. When you save money it doesn't vanish. You just put it aside for a while and then spend, so you have an infinite consumer spending in the long run according to this nonsense model.
In fact, when the money supply increases by, for example, 1 000 $ it takes time for all goods to be expressed in new prices as a result of higher demand. So, the multiplier effect is basically the rise in prices of all goods and services rather than an increase in price of a good on which the initial higher supply of money was spent.
Waste of time
simple and straight forward! ❤️🥹 thank you sm