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Review Efficiency
Priority 11/64
Learn tools of fiscal policy
MPC Tax cut multiplier
Desired fiscal restraint=AD Excess/Multiplier
Cumulative Reduction in Spending=Multiplier*Initial Budget Cut
Budget cuts should equal the size of the desired fiscal restraint
Total change in spending = Multiplier*New spending Injection
A cut in transfer payments reduces the disposable income of transfer recipients
AD SHortfall: The amount of additional aggregate demand needed to achieve full employment after allowing for price-level changes.
AD Excess: The amount by which aggregate demand must be reduced to achieve full-employment equilibrium after allowing for price level changes.
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