Business, 25.03.2021 19:00, alexj5

If the MPC were about 0.75 on average, this would imply a government spending multiplier of about 4, according to the simple formula used in introductory courses. However, real world estimates of the spending multiplier in the US are often in the (wide) range of 0.5 to 2.25. What is a frequently cited reason why the measured spending multiplier is lower than what the simple formula would predict

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If the MPC were about 0.75 on average, this would imply a government spending multiplier of about 4,...