List the reasons why the actual multiplier, which is estimated to be less than 2 for the U.S. economy, is much less than what the oversimplified formula suggests
The oversimplified formula:
1 . ignores variable imports, which reduce the size of the multiplier.
2 . ignores price-level changes, which reduce the size of the multiplier.
3 . ignores the income tax, which reduces the size of the multiplier.
4 . ignores the rising interest rates that accompany any autonomous increase in spending, which also reduce the size of the multiplier.
You might also like to view...
From the World Bank's establishment after WWII through the mid-1960s, its development aid focused on
a. basic human needs. b. good governance. c. structural adjustment. d. infrastructure.
The observation that people tend to value something more highly when they own it than when they don't is called the
A) endorsement effect. B) endowment effect. C) path-dependent effect. D) wealth effect.