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macro question on govt spending multiplier

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wow this seems like jus applied maths rather than economics, seems very challenging and miles above the maths done at A level.
Reply 21
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hiddengem
OP
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.
i would set the money supply yourself, to M and take it as an exogenously determined variable, ie it's fixed.
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.
Reply 24
Avatar for hiddengem
hiddengem
OP
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:
r=kY−Ml r=\frac{kY-M}{l}

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.
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:smile: and I can give a better answer later.
hiddengem
ok, so we had L=kY -lr.
equating to M, we get:

M=kY-lr.

rearranging we get:
r=kY−Ml r=\frac{kY-M}{l}

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.
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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