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Questions tagged [multiplier]

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5 votes
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Optimisation problem and KKT conditions (unsatisfied?)

I have to understand a thing about this exercise: find the minimum of $f(x, y) = (x-2)^2 + y$ subject to $y-x^3 \geq 0$, $y+x^3 \leq 0$ and $y \geq 0$. Now, I solved the problem quite easily in a ...
Henry's user avatar
  • 153
2 votes
1 answer

why does consumption not have a positive multiplier?

My tutor said that only $I$, $G$, $X-M$ in AD can include a multiplier and that consumption does not create a multiplier effect. I understand that these factors affect my ability to consume and that ...
anon's user avatar
  • 21
3 votes
2 answers

The marginal propensity to consume and the multiplier according to Keynes

In "The General Theory of Employment, Interest and Money", Chapter 10: The marginal propensity to consume and the multiplier, John Maynard Keynes says: Our normal psychological law that, ...
santos82h's user avatar
  • 175
1 vote
2 answers

Why is the multiplicator effect considered stronger if money is handed out to poor people rather than the well off?

Frequently, extra handout to poor people during economic crisis is motivated by the multiplier effect. The reasoning goes something like this: since the recipients are poor they will consume the extra ...
d-b's user avatar
  • 205
1 vote
0 answers

The case where the entire amount of investment goods are supplied by the imports

A positive investment multiplier does not exist in an open economy simple Keynesian model when the entire amount of investment goods is supplied from import. Examine the validity of this statement. My ...
petearGriffin's user avatar
2 votes
1 answer

Price rigidity and demand-constrained economies

In this note,, Krugman develops a simple model to introduce the idea that whenever an economy experiences price rigidity then this economy is demand-...
BAL's user avatar
  • 457
3 votes
2 answers

setting of Lagrangian function

Consider a simple consumer's problem: Max $u(X)$ s.t. $\sum_i^l p_i x_i\leq \sum_i^l p_i w_i$ $w$ is initial endowment. We can set the Lagrangian function to solve this problem. $L=u(X)+\lambda ( \...
martian03's user avatar
  • 245