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In microeconomics, the expenditure function represents the minimum amount of expenditure needed to achieve a given level of utility, given a utility function and the prices of goods. Formally, if there is a utility function u {\displaystyle u} that describes preferences over n goods, the expenditure function e ( p , u ∗ ) {\displaystyle e(p,u ...
Multipliers can be calculated to analyze the effects of fiscal policy, or other exogenous changes in spending, on aggregate output. For example, if an increase in German government spending by €100, with no change in tax rates, causes German GDP to increase by €150, then the spending multiplier is 1.5.
In economics, the marginal propensity to consume (MPC) is a metric that quantifies induced consumption, the concept that the increase in personal consumer spending (consumption) occurs with an increase in disposable income (income after taxes and transfers). The proportion of disposable income which individuals spend on consumption is known as ...
A number of the policies Keynes advocated to address the Great Depression (notably government deficit spending at times of low private investment or consumption), and many of the theoretical ideas he proposed (effective demand, the multiplier, the paradox of thrift), had been advanced by authors in the 19th and early 20th centuries. (E.g.
The end result is a magnified, multiplied change in aggregate production initially triggered by the change in investment, but amplified by the change in consumption i.e. the initial investment multiplied by the consumption coefficient (Marginal Propensity to consume).
Its simplest form is the linear consumption function used frequently in simple Keynesian models: [4] = + where is the autonomous consumption that is independent of disposable income; in other words, consumption when disposable income is zero.
These consist of consumption expenditure C, planned investment expenditure, I p, government expenditure on goods and services, G and exports net of imports, NX. In the simplest exposition of Keynesian theory, the economy is assumed to be closed (which implies that NX = 0), and planned investment is exogenous and determined by the animal spirits ...
In microeconomics, the expenditure minimization problem is the dual of the utility maximization problem: "how much money do I need to reach a certain level of happiness?". This question comes in two parts. Given a consumer's utility function, prices, and a utility target,