Fiscal Policy - The Government Spending Multiplier

This video will introduce and explain the effect of an expansionary fiscal policy on aggregate demand, specifically an increase in government spending. When government spending increases, household incomes rise and therefore consumption increases, further adding to the expansionary effect on Aggregate Demand. If we know the marginal propensity to consume among a nation's households, we can calculate the size of the spending multiplier, and thereby determine how much of a stimulus would be needed to increase AD by a particular desired amount.
Want to learn more about economics, or just be ready for an upcoming quiz, test or end of year exam? Jason Welker is available for tutoring, IB internal assessment and extended essay support, and other services to support economics students and teachers. Learn more here! econclassroom.c...

[@AntonyWrightOfficial]

Great video. Power pitch and pace. Thanks for your help

[@TheEllieliz2]

Freaking out for upcoming exam in 20 days time. your vids helped me more than attending lectures.tq

[@francisodeh2104]

thank you so much mr Jason you are just sooooooo good. you brought me back to life with my struggles. this is your second video i watched and i feel like i am a professor already

[@skotrn24alktrio]

Much easier than my textbook to understand - thank you very much!

[@HoonaBanoona]

got my final economics exam tomorrow ahhh!! thanks so much for your videos :)

[@TheDroidSector101]

I have my economics exam tmw. I LOVE YOU.

[@adedejiandu6423]

i love the intro music,makes economics so awesome!!!!!!!!!!than you welkerjason

[@zbychu8096]

Great way of explaining things! Thanks

[@travisiommi]

Great video. Do you have one that takes into account the leakage of import purchases and taxes? And how do you compensate for the increased prices? And what happens when there is an increased in aggregate demand but their is no supply of the goods and services? Awesome stuff.

[@tawandachristopher]

Brillian thanks!, could you also talk about the aggregate spending line

[@fredrickashaba6497]

I LOVE THE MUSIC IN IT

[@MrTugwit]

Say b = mpc, Yt = tot income, C = consump, a = autonomous consump, I = investment, NX = net exports, G = govt spending. 1) Yt = C + I + NX + G 2) Yt = (1/(1-b)) (a+I+NX+G -bT) Add $1 to G in equation 1, and Yt increases $1. No multiplier. Equation 2 is derived from, and can be set equal to equation 1, so it must give the same answer as equation 1. You can't add to G in eq 2. That would illegally put addition 1st in the order of operations. The fiscal "multiplier" is mathematically illegal.

[@ccassiwl233]

may i just simply say " I LOVE YOU" Thanks god. God sent me angels to save my Economics...

[@Sarah1627]

very helpful thanks..

[@danialmagid]

Great music at the start..

[@TheLoveforever520]

after watching this video, i am going to throw my textbook away.

[@nobitatabino5959]

Thanks

[@ksy0209]

[@JasonWelker]

Your question is related to microeconomics, not macro. Therefore, you need to watch the videos in my Market Failure playlist. Click on my name and go to my channel, navigate to "Videos" and then "Playlists". Find unit 1.4 Market Failure and there will be videos there which can help you answer your question!

[@Happy-gv2mf]

can someone please tell me what is constrained governmet spending in a simple definition plssssss ive been searching for like an hour but got nothing. im in grade 10

[@JasonWelker]

It's the simple idea that any budget deficit has to be financed somehow: 1) printing money (which leads to inflation), 2) borrowing from the public and foreigners (which could drive up interest rates and cause crowding out) 3) using foreign exchange reserves (which could lead to balance of payments problems later on if they are not replenished through trade surpluses) and 4) selling government assets (public lands, public utilities, SOEs, etc...) The government is therefore "constrained" in its ability to run budget deficits to achieve its fiscal policy aims by these four limitations. Any fiscal stimulus therefore comes with an opportunity cost: 1) inflation, 2) increased debt to foreigners and higher interest rates, 3) depreciation of the currency or 4) decrease in public wealth and private ownership of assets. Simple enough for you? There's no such thing as a free lunch, not even for government!

[@Happy-gv2mf]

Jason Welker thank you so much !

[@hchocoj]

What is IB economics?

[@schoolstuff48]

wait why is 1billion equal to 1 million. I am confused there, someone helpppp

[@rowanpadraic7320]

I think you're confusing the 1 million with 1000 million which is the equivalent to 1 billion.

[@Lourenco.LopesX]

intro song name?

[@MrTugwit]

Have you ever seen this equation: Yt = C+I+NX+G It's an equation. Dollars on both sides. Add $1 to one side, same happens on the other side: Yt + $1 = C+I+NX+G + $1 No multiplier. What you're saying about a "multiplier" is complete NONSENSE.

[@evantuccillo4318]

what are you smoking because I want some. The equation you speak of exists but has nothing to do with the multiplier effect.

[@vikashjakhar9473]

Thanks