Fiscal Policy
AP Macroeconomics · Flashcards
AP MACROECONOMICS · FLASHCARDS
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QUESTION
What is a budget deficit?
QUESTION
What is crowding out effect?
QUESTION
Identify the equation for the fiscal multiplier.
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ANSWER
Multiplier
=
1
1
−
M
P
C
(
1
−
t
)
\text{Multiplier} = \frac{1}{1 - MPC(1 - t)}
Multiplier
=
1
−
M
P
C
(
1
−
t
)
1
. Accounts for tax rate effects on spending multiplier.
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