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Category Archives: Multiplier Effect

Government stimulus spending and the multiplier

“Our research shows no evidence of a Keynesian ‘multiplier’ effect.” So, says Harvard professor Robert J.Barrow, who together with Charles J.Redlick, wrote a piece in The Wall Street Journal last Thursday. According to Barrow and Redlick, government stimulus packages are predicated on the view that expenditure multipliers are greater than one. To estimate these potential multiplier values they examined US … Continue reading

Posted by Nigel Tree | Leave a comment

TUC warns against cutting public spending

The prospect of a double-dip recession with unemployment reaching 4 million followed by social unrest on our streets, was the scenario put forward by Brendan Barber, general secretary of the Trades Union Congress (TUC).   Mr Barber put this view forward yesterday immediately prior to the TUC annual conference, as a response to the prospect of severe cuts in public … Continue reading

Posted by Nigel Tree | Leave a comment

US fiscal policy and the multiplier effect

Traditional Keynesian theory suggests that a change in government expenditure on real GDP has an effect greater than one-for-one. In other words as a government pumps money into the economy this will put unemployed resources to work which will have a one-for-one effect initially. However, as households receive additional income they will spend some of this and thus there will … Continue reading

Posted by Nigel Tree | Leave a comment