# macro question on govt spending multiplierWatch

9 years ago
#21
wow this seems like jus applied maths rather than economics, seems very challenging and miles above the maths done at A level.
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Thread starter 9 years ago
#22
(Original post by MeAndBubbles)
the maths is partial differentiation, were you using that?
yeh, i used that to get what i first thought was the govt multiplier, but got a '-m' in the denominator, which was obsviously wrong.
0
9 years ago
#23
i would set the money supply yourself, to M and take it as an exogenously determined variable, ie it's fixed.
0
9 years ago
#24
(Original post by yoyo462001)
wow this seems like jus applied maths rather than economics, seems very challenging and miles above the maths done at A level.
it's a piece of piss really, you'd have no problems with it!

matrices are important at degree, which you may or maynot cover at A'level.
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Thread starter 9 years ago
#25
(Original post by MeAndBubbles)
i would set the money supply yourself, to M and take it as an exogenously determined variable, ie it's fixed.

ok, so we had L=kY -lr.
equating to M, we get:

M=kY-lr.

rearranging we get:

as our LM curve. finally thanks a lot, seriously took tooooooo long to do this question.

is it right to think:
an increase in m, leads to an increase in M, and since
Y = C + I + G + X - M
this implies that Y decreases for all interest rate levels, hence moving the LM curve downwards.
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9 years ago
#26
(Original post by hiddengem)
yeh, i used that to get what i first thought was the govt multiplier, but got a '-m' in the denominator, which was obsviously wrong.
i'm busy, now I'll have a look later and I can give a better answer later.
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9 years ago
#27
(Original post by hiddengem)
ok, so we had L=kY -lr.
equating to M, we get:

M=kY-lr.

rearranging we get:

as our LM curve. finally thanks a lot, seriously took tooooooo long to do this question.

is it right to think:
an increase in m, leads to an increase in M, and since
Y = C + I + G + X - M
this implies that Y decreases for all interest rate levels, hence moving the LM curve downwards.
ugh??? no, changing m will shift the IS curve, and you move along the LM curve to a different Y,r combination. Oh sorry M as in imports, THE BP curve tells you, I'll check tomorrow.
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9 years ago
#28
(Original post by illy123)
If it were 1/MPC; then during recessions where people spend very little of their income, e.g. 0.0000002 the multiplier would be very large.

1/1-MPC or 1/MPW whereby MPW = 1 - MPC

Could you say that as Y = C(Y-T) + I + G, then if T and I are fixed dy = C'dY + dG ... which gives dY/dG = 1(1-C')

And as Y = CY - CT + I + G, then you can rearrange that to get C' which is reliant on imports? Or am I being silly?

You're using a differential there, not sure really, my book does it with partial differentiation.
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