logo image

Balanced budget multiplier

What is the likely magnitude of the The “balanced budget multiplier”? The magnitude of either the multiplier or the balanced budget multiplier for the UK will depend on the accuracy of the statistics that are referred to. Moreover, the multiplier for the UK has to account for expenditure increases which are at market prices. As a result, these include import and fact costs which are not part of domestic product.. Thus rise in GDP will have to be calculated at factor cost, and should be related to the domestic-output content of expenditure.

The MPC has been estimated at 0.9, and MPZ is 0.32, giving an import-adjusted MPC of 0.58. The multiplier would be thus: 1/(1-(MPC-MPZ) = 1/(1-0.58)=1/0.42=2.4. This, though, takes no account of tax, which is necessary to find the balanced budget multiplier. In 1996, there were three marginal rates of taxation, 20%, 24%, and 40%, but it is likely that the average was 24%. National Insurance is another leakage and thus a form of taxation that also has to be taken account of, and in 1996 it was 9%. This gives a figure of 33% for overall taxation.

The balanced budget multiplier will therefore be: 1/{1-[(MPC*0.77)-0.32]} = 1/[1-(0.693-0.32)] = 1/(1-0.373) = 1/0.627 =1.59 1.59 is likely to

Need essay sample on "Balanced budget multiplier"? We will write a custom essay sample specifically for you for only $13.90/page

be the magnitude for the balanced budget multiplier. Unfortunately, it is only an estimate. It ignores the effects of firms selling or keeping inventories, and there are uncertainties about the accuracy of the data. Moreover, it assumes that unused capital and labour resources can be utilised, where as there may be good reason why they cannot be. [1]

Adapted from Dornbusch/Fischer/Startz, Macroeconomics, Mcgraw-Hill, 2001 [2] Adapted from Begg, Fischer, Dornbusch, Economics, Mcgraw-Hill, 2000Zorba’s Bakeries and Sons Ltd. was created at the village of Athiainou, Cyprus, at the 1st o October 1975 by Mr. Andreas Zorbas. It became a listed Company at the 22nd of November of 1979. The main activity of the Company was the production and delivery of baking products. At the October of 1988, the customer demands “forced” the owner of the Company to take the decision, for opening his first store at Nicosia. At the year of 2000, the Company was running seven (7) shops at the wider area of Nicosia and at the same year it became public. At the 27th of December of 2000 the Company became member of the Cyprus Stock Exchange (C.S.E.).

The whole production is made at the two factories of the Company at Larnaka Industrial Area. The old one is running since 1999 and the new one since 2002. The new premises (an investment of about 6 million pounds) is employing the latest technologies and it is one of the most advance at Europe. The Company is satisfying all the International Quality Standards like ISO 9000 and HACCP (Hazard Analysis of Critical Control Points) for both Production facilities.

Read full document

Can’t wait to take that assignment burden offyour shoulders?

Let us know what it is and we will show you how it can be done!
×
Sorry, but copying text is forbidden on this website. If you need this or any other sample, please register
Signup & Access Essays

Already on Businessays? Login here

No, thanks. I prefer suffering on my own
Sorry, but copying text is forbidden on this website. If you need this or any other sample register now and get a free access to all papers, carefully proofread and edited by our experts.
Sign in / Sign up
No, thanks. I prefer suffering on my own
Not quite the topic you need?
We would be happy to write it
Join and witness the magic
Service Open At All Times
|
Complete Buyer Protection
|
Plagiarism-Free Writing

Emily from Businessays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/chNgQy