General Theory of Keynes was the beginning of a new theoretical approach to the analysis of economic phenomena and economic policy. In Keynes's theory it is assumed the presence of an underemployment equilibrium in which the income is entirely spent and invested. Draw a diagram on the horizontal axis and income on consumer spending on C and investment I ordered. The 45 ° diagonal (gray) identify the points of equilibrium in which the income is entirely spent on consumption and investment (Y = C + I). Only one of the points on the diagonal is compatible with the full employment income (the point "e"). The reality, Keynes noted, however, shows how the protracted situations of underemployment equilibrium "s" (red) in which only part of the Y resources are actually used in the production of income. The rest remain unemployed because of weak domestic demand. To Keynes's private investment are constant in the short term.
Keynes proposed to support demand through public intervention. Thus investment spending would have shifted the demand function upward, bringing the balance of the economy towards full employment. The graph just given the public expenditure on investment allows the passage of underemployment equilibrium "S" (red) to balance "k" (black), and closer to full employment "and".
policy keynesianarichiedeva therefore public intervention on the question to leave the Empire underemployment. The expenditure also guaranteed " multiplier effects " by the famous mechanism of public expenditure multiplier that any intervention generated more than proportional benefits to the expense.
Keynes proposed to support demand through public intervention. Thus investment spending would have shifted the demand function upward, bringing the balance of the economy towards full employment. The graph just given the public expenditure on investment allows the passage of underemployment equilibrium "S" (red) to balance "k" (black), and closer to full employment "and".
policy keynesianarichiedeva therefore public intervention on the question to leave the Empire underemployment. The expenditure also guaranteed " multiplier effects " by the famous mechanism of public expenditure multiplier that any intervention generated more than proportional benefits to the expense.
The Keynesian moltilpicatore
The entire Keynesian theory is based on a particular hypothesis in the consumption function: constant considered private investment, consumption spending is determined To be an autonomous, independent income, and earnings-related part by the propensity to consume of individuals "c".
C = A + CY
The individual uses only part of its income on consumer spending. For example, 80% of income spent on consumption while the remainder is put in savings. The costs in turn determine the income of other individuals who, in turn, it will allocate a part in fuel consumption and the rest in savings, and so on. In practice, any increase in income or variable components creates a "multiplier effect" to the increase in spending over the original. The phenomenon is represented in the "Keynesian multiplier", as we see construction;
Y = C = A + IY + I + CY
Y (1-c) = A + I
Y = 1 / (1-c) * (A + I)
The Keynesian multiplier is therefore 1 / ( 1-c). For a marginal propensity to consume of 0.8 (80%), the multiplier will assume a value of 5. In fact, k = 1 / (1-c), since there will be k = 0.8 c = 1 / (1-.8) = 1 / 0, 2 = 5. The economic multiplier is clear: any increase in spending or investing in the C generates an increase in national income five times the initial spending. The additional expenditure, in fact, cause cascading effects in the incomes of most individuals.
C = A + CY
The individual uses only part of its income on consumer spending. For example, 80% of income spent on consumption while the remainder is put in savings. The costs in turn determine the income of other individuals who, in turn, it will allocate a part in fuel consumption and the rest in savings, and so on. In practice, any increase in income or variable components creates a "multiplier effect" to the increase in spending over the original. The phenomenon is represented in the "Keynesian multiplier", as we see construction;
Y = C = A + IY + I + CY
Y (1-c) = A + I
Y = 1 / (1-c) * (A + I)
The Keynesian multiplier is therefore 1 / ( 1-c). For a marginal propensity to consume of 0.8 (80%), the multiplier will assume a value of 5. In fact, k = 1 / (1-c), since there will be k = 0.8 c = 1 / (1-.8) = 1 / 0, 2 = 5. The economic multiplier is clear: any increase in spending or investing in the C generates an increase in national income five times the initial spending. The additional expenditure, in fact, cause cascading effects in the incomes of most individuals.
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