This note provides an overview of fiscal policy as a tool and fiscal policy affects GDP through the income multiplier. Mechanics of the income multiplier is explained and algebraic output is provided. The note also provides examples of how the parameters related to disposable income (for example, the tax rate and the marginal propensity to consumer) affect the value of the income multiplier.
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by Melissa M. Appleyard, Alan R Bekenstein, Petra Christmann Source: Darden School of Business 6 pages. Publication Date: August 23, 2002. Prod. #: UV0483-PDF-ENG
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