Saturday, August 20, 2011

Income multiplier help?

the ratio of 2:3 is needed to maintain a constant interest rate. You get 3 times the investment by spending, and 4 times the increase in money supply. So to get a total of 12,000 without a change in the rate, you have to spend for $2 for every $3 you bump the supply. You'll get $6 from the spend, and $12 from the money supply bump. So, divide $12,000 by the total of $18 to see how many sets you'll need. I got 667 as a result, so I need 667 times $2 in spending, and 667 times $3 in money supply to reach $12,000 in income. Test it. 667*3*2$ = $4002 and 667*4*3 = 8004 for a total of 12,006

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