SHORT ANSWER PLEASE
How do you affect the size of the money multiplier ? ?
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During the Great Depression, the US economy experienced many bank runs, to the point where people became unwilling to keep their money in banks, preferring to hold on to their cash. How would you expect such a shift away from checkable deposits toward currency to affect the size of the money multiplier?
Most macroeconomists believe that it is a good thing that taxes act as an automatic stabilizer and lower the size of the Keynesian multiplier. First, explain both â how do taxes act as an automatic stabilizer? And how do they affect the size of the multiplier? However, a smaller multiplier means that the change in government spending needed to erase an expansionary or recessionary gap is larger. Is this an inconsistency? Why or why not?
Explain how peopleâs decisions can affect the money multiplier andthus the money supply.