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Chapter 1. Welcome to Economics!
1.1 What Is Economics, and Why Is It Important?
1.2 Microeconomics and Macroeconomics
1.3 How Economists Use Theories and Models to Understand Economic Issues
1.4 How Economies Can Be Organized: An Overview of Economic Systems
Chapter 2. Choice in a World of Scarcity
Introduction to Choice in a World of Scarcity
2.1 How Individuals Make Choices Based on Their Budget Constraint
2.2 The Production Possibilities Frontier and Social Choices
2.3 Confronting Objections to the Economic Approach
Chapter 3. Demand and Supply
Introduction to Demand and Supply
3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services
3.2 Shifts in Demand and Supply for Goods and Services
3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process
3.4 Price Ceilings and Price Floors
3.5 Demand, Supply, and Efficiency
Chapter 4. Labor and Financial Markets
Introduction to Labor and Financial Markets
4.1 Demand and Supply at Work in Labor Markets
4.2 Demand and Supply in Financial Markets
4.3 The Market System as an Efficient Mechanism for Information
Chapter 5. Elasticity
Introduction to Elasticity
5.1 Price Elasticity of Demand and Price Elasticity of Supply
5.2 Polar Cases of Elasticity and Constant Elasticity
5.3 Elasticity and Pricing
5.4 Elasticity in Areas Other Than Price
Chapter 6. Consumer Choices
Introduction to Consumer Choices
6.1 Consumption Choices
6.2 How Changes in Income and Prices Affect Consumption Choices
6.3 Labor-Leisure Choices
6.4 Intertemporal Choices in Financial Capital Markets
Chapter 7. Cost and Industry Structure
Introduction to Cost and Industry Structure
7.1 Explicit and Implicit Costs, and Accounting and Economic Profit
7.2 The Structure of Costs in the Short Run
7.3 The Structure of Costs in the Long Run
Chapter 8. Perfect Competition
Introduction to Perfect Competition
8.1 Perfect Competition and Why It Matters
8.2 How Perfectly Competitive Firms Make Output Decisions
8.3 Entry and Exit Decisions in the Long Run
8.4 Efficiency in Perfectly Competitive Markets
Chapter 9. Monopoly
Introduction to a Monopoly
9.1 How Monopolies Form: Barriers to Entry
9.2 How a Profit-Maximizing Monopoly Chooses Output and Price
Chapter 10. Monopolistic Competition and Oligopoly
Introduction to Monopolistic Competition and Oligopoly
10.1 Monopolistic Competition
10.2 Oligopoly
Chapter 11. Monopoly and Antitrust Policy
Introduction to Monopoly and Antitrust Policy
11.1 Corporate Mergers
11.2 Regulating Anticompetitive Behavior
11.3 Regulating Natural Monopolies
11.4 The Great Deregulation Experiment
Chapter 12. Environmental Protection and Negative Externalities
Introduction to Environmental Protection and Negative Externalities
12.1 The Economics of Pollution
12.2 Command-and-Control Regulation
12.3 Market-Oriented Environmental Tools
12.4 The Benefits and Costs of U.S. Environmental Laws
12.5 International Environmental Issues
12.6 The Tradeoff between Economic Output and Environmental Protection
Chapter 13. Positive Externalities and Public Goods
Introduction to Positive Externalities and Public Goods
13.1 Why the Private Sector Under Invests in Innovation
13.2 How Governments Can Encourage Innovation
13.3 Public Goods
Chapter 14. Poverty and Economic Inequality
Introduction to Poverty and Economic Inequality
14.1 Drawing the Poverty Line
14.2 The Poverty Trap
14.3 The Safety Net
14.4 Income Inequality: Measurement and Causes
14.5 Government Policies to Reduce Income Inequality
Chapter 15. Issues in Labor Markets: Unions, Discrimination, Immigration
Introduction to Issues in Labor Markets: Unions, Discrimination, Immigration
15.1 Unions
15.2 Employment Discrimination
15.3 Immigration
Chapter 16. Information, Risk, and Insurance
Introduction to Information, Risk, and Insurance
16.1 The Problem of Imperfect Information and Asymmetric Information
16.2 Insurance and Imperfect Information
Chapter 17. Financial Markets
17.1 How Businesses Raise Financial Capital
17.2 How Households Supply Financial Capital
17.3 How to Accumulate Personal Wealth
Chapter 18. Public Economy
Introduction to Public Economy
18.1 Voter Participation and Costs of Elections
18.2 Special Interest Politics
18.3 Flaws in the Democratic System of Government
Chapter 19. The Macroeconomic Perspective
Introduction to the Macroeconomic Perspective
19.1 Measuring the Size of the Economy: Gross Domestic Product
19.2 Adjusting Nominal Values to Real Values
19.3 Tracking Real GDP over Time
19.4 Comparing GDP among Countries
19.5 How Well GDP Measures the Well-Being of Society
Chapter 20. Economic Growth
Introduction to Economic Growth
20.1 The Relatively Recent Arrival of Economic Growth
20.2 Labor Productivity and Economic Growth
20.3 Components of Economic Growth
20.4 Economic Convergence
Chapter 21. Unemployment
Introduction to Unemployment
21.1 How the Unemployment Rate is Defined and Computed
21.2 Patterns of Unemployment
21.3 What Causes Changes in Unemployment over the Short Run
21.4 What Causes Changes in Unemployment over the Long Run
Chapter 22. Inflation
Introduction to Inflation
22.1 Tracking Inflation
22.2 How Changes in the Cost of Living are Measured
22.3 How the U.S. and Other Countries Experience Inflation
22.4 The Confusion Over Inflation
22.5 Indexing and Its Limitations
Chapter 23. The International Trade and Capital Flows
Introduction to the International Trade and Capital Flows
23.1 Measuring Trade Balances
23.2 Trade Balances in Historical and International Context
23.3 Trade Balances and Flows of Financial Capital
23.4 The National Saving and Investment Identity
23.5 The Pros and Cons of Trade Deficits and Surpluses
23.6 The Difference between Level of Trade and the Trade Balance
Chapter 24. The Aggregate Demand/Aggregate Supply Model
Introduction to the Aggregate Demand/Aggregate Supply Model
24.1 Macroeconomic Perspectives on Demand and Supply
24.2 Building a Model of Aggregate Demand and Aggregate Supply
24.3 Shifts in Aggregate Supply
24.4 Shifts in Aggregate Demand
24.5 How the AD/AS Model Incorporates Growth, Unemployment, and Inflation
24.6 Keynes' Law and Say's Law in the AD/AS Model
Chapter 25. The Keynesian Perspective
Introduction to the Keynesian Perspective
25.1 Aggregate Demand in Keynesian Analysis
25.2 The Building Blocks of Keynesian Analysis
25.3 The Phillips Curve
25.4 The Keynesian Perspective on Market Forces
Chapter 26. The Neoclassical Perspective
Introduction to the Neoclassical Perspective
26.1 The Building Blocks of Neoclassical Analysis
26.2 The Policy Implications of the Neoclassical Perspective
26.3 Balancing Keynesian and Neoclassical Models
Chapter 27. Money and Banking
Introduction to Money and Banking
27.1 Defining Money by Its Functions
27.2 Measuring Money: Currency, M1, and M2
27.3 The Role of Banks
27.4 How Banks Create Money
Chapter 28. Monetary Policy and Bank Regulation
Introduction to Monetary Policy and Bank Regulation
28.1 The Federal Reserve Banking System and Central Banks
28.2 Bank Regulation
28.3 How a Central Bank Executes Monetary Policy
28.4 Monetary Policy and Economic Outcomes
28.5 Pitfalls for Monetary Policy
Chapter 29. Exchange Rates and International Capital Flows
Introduction to Exchange Rates and International Capital Flows
29.1 How the Foreign Exchange Market Works
29.2 Demand and Supply Shifts in Foreign Exchange Markets
29.3 Macroeconomic Effects of Exchange Rates
29.4 Exchange Rate Policies
Chapter 30. Government Budgets and Fiscal Policy
Introduction to Government Budgets and Fiscal Policy
30.1 Government Spending
30.2 Taxation
30.3 Federal Deficits and the National Debt
30.4 Using Fiscal Policy to Fight Recession, Unemployment, and Inflation
30.5 Automatic Stabilizers
30.6 Practical Problems with Discretionary Fiscal Policy
30.7 The Question of a Balanced Budget
Chapter 31. The Impacts of Government Borrowing
Introduction to the Impacts of Government Borrowing
31.1 How Government Borrowing Affects Investment and the Trade Balance
31.2 Fiscal Policy, Investment, and Economic Growth
31.3 How Government Borrowing Affects Private Saving
31.4 Fiscal Policy and the Trade Balance
Chapter 32. Macroeconomic Policy Around the World
Introduction to Macroeconomic Policy around the World
32.1 The Diversity of Countries and Economies across the World
32.2 Improving Countries' Standards of Living
32.3 Causes of Unemployment around the World
32.4 Causes of Inflation in Various Countries and Regions
32.5 Balance of Trade Concerns
Chapter 33. International Trade
Introduction to International Trade
33.1 Absolute and Comparative Advantage
33.2 What Happens When a Country Has an Absolute Advantage in All Goods
33.3 Intra-industry Trade between Similar Economies
33.4 The Benefits of Reducing Barriers to International Trade
Chapter 34. Globalization and Protectionism
Introduction to Globalization and Protectionism
34.1 Protectionism: An Indirect Subsidy from Consumers to Producers
34.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions
34.3 Arguments in Support of Restricting Imports
34.4 How Trade Policy Is Enacted: Globally, Regionally, and Nationally
34.5 The Tradeoffs of Trade Policy
Appendix A: The Use of Mathematics in Principles of Economics
Appendix B: Indifference Curves
Appendix C: Present Discounted Value
Appendix D: The Expenditure-Output Model
Principles of Economics
(This appendix should be consulted after first reading The Aggregate Demand/Aggregate Supply Model and The Keynesian Perspective.) The fundamental ideas of Keynesian economics were developed before the AD/AS model was popularized. From the 1930s until the 1970s, Keynesian economics was usually explained with a different model, known as the expenditure-output approach. This approach is strongly rooted in the fundamental assumptions of Keynesian economics: it focuses on the total amount of spending in the economy, with no explicit mention of aggregate supply or of the price level (although as you will see, it is possible to draw some inferences about aggregate supply and price levels based on the diagram).
The Axes of the Expenditure-Output Diagram
The expenditure-output model, sometimes also called the Keynesian cross diagram, determines the equilibrium level of real GDP by the point where the total or aggregate expenditures in the economy are equal to the amount of output produced. The axes of the Keynesian cross diagram presented in Figure 1 show real GDP on the horizontal axis as a measure of output and aggregate expenditures on the vertical axis as a measure of spending.
Figure 1. The aggregate expenditure-output model shows aggregate expenditures on the vertical axis and real GDP on the horizontal axis. A vertical line shows potential GDP where full employment occurs. The 45-degree line shows all points where aggregate expenditures and output are equal. The aggregate expenditure schedule shows how total spending or aggregate expenditure increases as output or real GDP rises. The intersection of the aggregate expenditure schedule and the 45-degree line will be the equilibrium. Equilibrium occurs at E0, where aggregate expenditure AE0 is equal to the output level Y0.
Remember that GDP can be thought of in several equivalent ways: it measures both the value of spending on final goods and also the value of the production of final goods. All sales of the final goods and services that make up GDP will eventually end up as income for workers, for managers, and for investors and owners of firms. The sum of all the income received for contributing resources to GDP is called national income (Y). At some points in the discussion that follows, it will be useful to refer to real GDP as "national income." Both axes are measured in real (inflation-adjusted) terms.
The Potential GDP Line and the 45-degree Line
The Keynesian cross diagram contains two lines that serve as conceptual guideposts to orient the discussion. The first is a vertical line showing the level of potential GDP. Potential GDP means the same thing here that it means in the AD/AS diagrams: it refers to the quantity of output that the economy can produce with full employment of its labor and physical capital.
The second conceptual line on the Keynesian cross diagram is the 45-degree line, which starts at the origin and reaches up and to the right. A line that stretches up at a 45-degree angle represents the set of points (1, 1), (2, 2), (3, 3) and so on, where the measurement on the vertical axis is equal to the measurement on the horizontal axis. In this diagram, the 45-degree line shows the set of points where the level of aggregate expenditure in the economy, measured on the vertical axis, is equal to the level of output or national income in the economy, measured by GDP on the horizontal axis.
When the macroeconomy is in equilibrium, it must be true that the aggregate expenditures in the economy are equal to the real GDP—because by definition, GDP is the measure of what is spent on final sales of goods and services in the economy. Thus, the equilibrium calculated with a Keynesian cross diagram will always end up where aggregate expenditure and output are equal—which will only occur along the 45-degree line.
The Aggregate Expenditure Schedule
The final ingredient of the Keynesian cross or expenditure-output diagram is the aggregate expenditure schedule, which will show the total expenditures in the economy for each level of real GDP. The intersection of the aggregate expenditure line with the 45-degree line—at point E0 in Figure 1—will show the equilibrium for the economy, because it is the point where aggregate expenditure is equal to output or real GDP. After developing an understanding of what the aggregate expenditures schedule means, we will return to this equilibrium and how to interpret it.
Building the Aggregate Expenditure Schedule
Aggregate expenditure is the key to the expenditure-income model. The aggregate expenditure schedule shows, either in the form of a table or a graph, how aggregate expenditures in the economy rise as real GDP or national income rises. Thus, in thinking about the components of the aggregate expenditure line—consumption, investment, government spending, exports and imports—the key question is how expenditures in each category will adjust as national income rises.
Consumption as a Function of National Income
How do consumption expenditures increase as national income rises? People can do two things with their income: consume it or save it (for the moment, let's ignore the need to pay taxes with some of it). Each person who receives an additional dollar faces this choice. The marginal propensity to consume (MPC), is the share of the additional dollar of income a person decides to devote to consumption expenditures. The marginal propensity to save (MPS) is the share of the additional dollar a person decides to save. It must always hold true that:
[latex]MPC + MPS = 1[/latex]
For example, if the marginal propensity to consume out of the marginal amount of income earned is 0.9, then the marginal propensity to save is 0.1.
With this relationship in mind, consider the relationship among income, consumption, and savings shown in Figure 2. (Note that we use "Aggregate Expenditure" on the vertical axis in this and the following figures, because all consumption expenditures are parts of aggregate expenditures.)
An assumption commonly made in this model is that even if income were zero, people would have to consume something. In this example, consumption would be $600 even if income were zero. Then, the MPC is 0.8 and the MPS is 0.2. Thus, when income increases by $1,000, consumption rises by $800 and savings rises by $200. At an income of $4,000, total consumption will be the $600 that would be consumed even without any income, plus $4,000 multiplied by the marginal propensity to consume of 0.8, or $ 3,200, for a total of $ 3,800. The total amount of consumption and saving must always add up to the total amount of income. (Exactly how a situation of zero income and negative savings would work in practice is not important, because even low-income societies are not literally at zero income, so the point is hypothetical.) This relationship between income and consumption, illustrated in Figure 2 and Table 1, is called the consumption function.
Figure 2. The Consumption Function. In the expenditure-output model, how does consumption increase with the level of national income? Output on the horizontal axis is conceptually the same as national income, since the value of all final output that is produced and sold must be income to someone, somewhere in the economy. At a national income level of zero, $600 is consumed. Then, each time income rises by $1,000, consumption rises by $800, because in this example, the marginal propensity to consume is 0.8.
The pattern of consumption shown in Table 1 is plotted in Figure 2. To calculate consumption, multiply the income level by 0.8, for the marginal propensity to consume, and add $600, for the amount that would be consumed even if income was zero. Consumption plus savings must be equal to income.
Table 1. The Consumption Function
However, a number of factors other than income can also cause the entire consumption function to shift. These factors were summarized in the earlier discussion of consumption, and listed in Table 1. When the consumption function moves, it can shift in two ways: either the entire consumption function can move up or down in a parallel manner, or the slope of the consumption function can shift so that it becomes steeper or flatter. For example, if a tax cut leads consumers to spend more, but does not affect their marginal propensity to consume, it would cause an upward shift to a new consumption function that is parallel to the original one. However, a change in household preferences for saving that reduced the marginal propensity to save would cause the slope of the consumption function to become steeper: that is, if the savings rate is lower, then every increase in income leads to a larger rise in consumption.
Investment as a Function of National Income
Investment decisions are forward-looking, based on expected rates of return. Precisely because investment decisions depend primarily on perceptions about future economic conditions, they do not depend primarily on the level of GDP in the current year. Thus, on a Keynesian cross diagram, the investment function can be drawn as a horizontal line, at a fixed level of expenditure. Figure 3 shows an investment function where the level of investment is, for the sake of concreteness, set at the specific level of 500. Just as a consumption function shows the relationship between consumption levels and real GDP (or national income), the investment function shows the relationship between investment levels and real GDP.
Figure 3. The Investment Function. The investment function is drawn as a flat line because investment is based on interest rates and expectations about the future, and so it does not change with the level of current national income. In this example, investment expenditures are at a level of 500. However, changes in factors like technological opportunities, expectations about near-term economic growth, and interest rates would all cause the investment function to shift up or down.
The appearance of the investment function as a horizontal line does not mean that the level of investment never moves. It means only that in the context of this two-dimensional diagram, the level of investment on the vertical aggregate expenditure axis does not vary according to the current level of real GDP on the horizontal axis. However, all the other factors that vary investment—new technological opportunities, expectations about near-term economic growth, interest rates, the price of key inputs, and tax incentives for investment—can cause the horizontal investment function to shift up or down.
Government Spending and Taxes as a Function of National Income
In the Keynesian cross diagram, government spending appears as a horizontal line, as in Figure 4, where government spending is set at a level of 1,300. As in the case of investment spending, this horizontal line does not mean that government spending is unchanging. It means only that government spending changes when Congress decides on a change in the budget, rather than shifting in a predictable way with the current size of the real GDP shown on the horizontal axis.
Figure 4. The Government Spending Function. The level of government spending is determined by political factors, not by the level of real GDP in a given year. Thus, government spending is drawn as a horizontal line. In this example, government spending is at a level of 1,300. Congressional decisions to increase government spending will cause this horizontal line to shift up, while decisions to reduce spending would cause it to shift down.
The situation of taxes is different because taxes often rise or fall with the volume of economic activity. For example, income taxes are based on the level of income earned and sales taxes are based on the amount of sales made, and both income and sales tend to be higher when the economy is growing and lower when the economy is in a recession. For the purposes of constructing the basic Keynesian cross diagram, it is helpful to view taxes as a proportionate share of GDP. In the United States, for example, taking federal, state, and local taxes together, government typically collects about 30–35 % of income as taxes.
Table 2 revises the earlier table on the consumption function so that it takes taxes into account. The first column shows national income. The second column calculates taxes, which in this example are set at a rate of 30%, or 0.3. The third column shows after-tax income; that is, total income minus taxes. The fourth column then calculates consumption in the same manner as before: multiply after-tax income by 0.8, representing the marginal propensity to consume, and then add $600, for the amount that would be consumed even if income was zero. When taxes are included, the marginal propensity to consume is reduced by the amount of the tax rate, so each additional dollar of income results in a smaller increase in consumption than before taxes. For this reason, the consumption function, with taxes included, is flatter than the consumption function without taxes, as Figure 5 shows.
Figure 5. The Consumption Function Before and After Taxes The upper line repeats the consumption function from Figure 2. The lower line shows the consumption function if taxes must first be paid on income, and then consumption is based on after-tax income.
After-Tax Income
$0 $0 $0 $600 –$600
$1,000 $300 $700 $1,160 –$460
$2,000 $600 $1,400 $1,720 –$320
$4,000 $1,200 $2,800 $2,840 –$40
$5,000 $1,500 $3,500 $3,400 $100
Table 2. The Consumption Function Before and After Taxes
Exports and Imports as a Function of National Income
The export function, which shows how exports change with the level of a country's own real GDP, is drawn as a horizontal line, as in the example in Figure 6 (a) where exports are drawn at a level of $840. Again, as in the case of investment spending and government spending, drawing the export function as horizontal does not imply that exports never change. It just means that they do not change because of what is on the horizontal axis—that is, a country's own level of domestic production—and instead are shaped by the level of aggregate demand in other countries. More demand for exports from other countries would cause the export function to shift up; less demand for exports from other countries would cause it to shift down.
Figure 6. The Export and Import Functions. (a) The export function is drawn as a horizontal line because exports are determined by the buying power of other countries and thus do not change with the size of the domestic economy. In this example, exports are set at 840. However, exports can shift up or down, depending on buying patterns in other countries. (b) The import function is drawn in negative territory because expenditures on imported products are a subtraction from expenditures in the domestic economy. In this example, the marginal propensity to import is 0.1, so imports are calculated by multiplying the level of income by –0.1.
Imports are drawn in the Keynesian cross diagram as a downward-sloping line, with the downward slope determined by the marginal propensity to import (MPI), out of national income. In Figure 6 (b), the marginal propensity to import is 0.1. Thus, if real GDP is $5,000, imports are $500; if national income is $6,000, imports are $600, and so on. The import function is drawn as downward sloping and negative, because it represents a subtraction from the aggregate expenditures in the domestic economy. A change in the marginal propensity to import, perhaps as a result of changes in preferences, would alter the slope of the import function.
Using an Algebraic Approach to the Expenditure-Output Model
In the expenditure-output or Keynesian cross model, the equilibrium occurs where the aggregate expenditure line (AE line) crosses the 45-degree line. Given algebraic equations for two lines, the point where they cross can be readily calculated. Imagine an economy with the following characteristics.
[latex]Y=Real\;GDP\;or\;national\;income[/latex]
[latex]T=Taxes=0.3Y[/latex]
[latex]C=Consumption=140+0.9(Y-T)[/latex]
[latex]I=Investment=400[/latex]
[latex]G=Government\:spending=800[/latex]
[latex]X=Exports=600[/latex]
[latex]M=Imports=0.15Y[/latex]
Step 1. Determine the aggregate expenditure function. In this case, it is:
[latex]\begin{array}{r @{{}={}} l} AE & C+I+G+X-M \\ AE & 140+0.9(Y-T)+400+800+600-0.15Y \end{array}[/latex]
Step 3. The next step is to solve these two equations for Y (or AE, since they will be equal to each other). Substitute Y for AE:
[latex]Y=140+0.9(Y-T)+400+800+600-0.15Y[/latex]
Step 4. Insert the term 0.3Y for the tax rate T. This produces an equation with only one variable, Y.
Step 5. Work through the algebra and solve for Y.
[latex]\begin{array}{r @{{}={}} l}Y & 140+0.9(Y-0.3Y)+400+800+600-0.15Y \\[0.5em] Y & 140+0.9Y-0.27Y+1800-0.15Y \\[0.5em] Y & 1940+0.48Y \\[0.5em] Y-0.48Y & 1940 \\[0.5em] 0.52Y & 1940 \\[0.5em] \frac {0.52Y}{0.52} & \frac {1940}{0.52} \\[0.5em] Y & 3730 \end{array}[/latex]
This algebraic framework is flexible and useful in predicting how economic events and policy actions will affect real GDP.
Step 6. Say, for example, that because of changes in the relative prices of domestic and foreign goods, the marginal propensity to import falls to 0.1. Calculate the equilibrium output when the marginal propensity to import is changed to 0.1.
[latex]\begin{array}{r @{{}={}} l}Y & 140+0.9(Y-0.3Y)+400+800+600-0.1Y \\ Y & 1940-0.53Y \\ 0.47Y & 1940 \\ Y & 4127 \end{array}[/latex]
Step 7. Because of a surge of business confidence, investment rises to 500. Calculate the equilibrium output.
[latex]\begin{array}{r @{{}={}} l}Y & 140+0.9(Y-0.3Y)+500+800+600-0.15Y \\ Y & 2040+0.48Y \\ Y-0.48Y & 2040 \\ 0.52Y & 2040 \\ Y & 3923 \end{array}[/latex]
For issues of policy, the key questions would be how to adjust government spending levels or tax rates so that the equilibrium level of output is the full employment level. In this case, let the economic parameters be:
[latex]Y=National income[/latex]
[latex]G=Government\;spending=1,000[/latex]
[latex]Y=Imports=0.1(Y-T)[/latex]
Step 8. Calculate the equilibrium for this economy (remember Y = AE).
[latex]\begin{array}{r @{{}={}} l}Y & 200+0.9(Y-0.3Y)+600+1000+600-0.1(Y-0.3Y) \\ Y-0.63Y+0.07Y & 2400 \\ 0.44Y & 2400 \\ Y & 5454 \end{array}[/latex]
Step 9. Assume that the full employment level of output is 6,000. What level of government spending would be necessary to reach that level? To answer this question, plug in 6,000 as equal to Y, but leave G as a variable, and solve for G. Thus:
[latex]6000=200+0.9(6000-0.3(6000))+600+G+600-0.1(6000-0.3(6000))[/latex]
Step 10. Solve this problem arithmetically. The answer is: G = 1,240. In other words, increasing government spending by 240, from its original level of 1,000, to 1,240, would raise output to the full employment level of GDP.
Indeed, the question of how much to increase government spending so that equilibrium output will rise from 5,454 to 6,000 can be answered without working through the algebra, just by using the multiplier formula. The multiplier equation in this case is:
[latex]\frac{1}{1-0.56}=2.27[/latex]
Thus, to raise output by 546 would require an increase in government spending of 546/2.27=240, which is the same as the answer derived from the algebraic calculation.
This algebraic framework is highly flexible. For example, taxes can be treated as a total set by political considerations (like government spending) and not dependent on national income. Imports might be based on before-tax income, not after-tax income. For certain purposes, it may be helpful to analyze the economy without exports and imports. A more complicated approach could divide up consumption, investment, government, exports and imports into smaller categories, or to build in some variability in the rates of taxes, savings, and imports. A wise economist will shape the model to fit the specific question under investigation.
Building the Combined Aggregate Expenditure Function
All the components of aggregate demand—consumption, investment, government spending, and the trade balance—are now in place to build the Keynesian cross diagram. Figure 7 builds up an aggregate expenditure function, based on the numerical illustrations of C, I, G, X, and M that have been used throughout this text. The first three columns in Table 3 are lifted from the earlier Table 2, which showed how to bring taxes into the consumption function. The first column is real GDP or national income, which is what appears on the horizontal axis of the income-expenditure diagram. The second column calculates after-tax income, based on the assumption, in this case, that 30% of real GDP is collected in taxes. The third column is based on an MPC of 0.8, so that as after-tax income rises by $700 from one row to the next, consumption rises by $560 (700 × 0.8) from one row to the next. Investment, government spending, and exports do not change with the level of current national income. In the previous discussion, investment was $500, government spending was $1,300, and exports were $840, for a total of $2,640. This total is shown in the fourth column. Imports are 0.1 of real GDP in this example, and the level of imports is calculated in the fifth column. The final column, aggregate expenditures, sums up C + I + G + X – M. This aggregate expenditure line is illustrated in Figure 7.
Figure 7. A Keynesian Cross Diagram. Each combination of national income and aggregate expenditure (after-tax consumption, government spending, investment, exports, and imports) is graphed. The equilibrium occurs where aggregate expenditure is equal to national income; this occurs where the aggregate expenditure schedule crosses the 45-degree line, at a real GDP of $6,000. Potential GDP in this example is $7,000, so the equilibrium is occurring at a level of output or real GDP below the potential GDP level.
Government Spending + Investment + Exports
Aggregate Expenditure
$3,000 $2,100 $2,280 $2,640 $300 $4,620
Table 3. National Income-Aggregate Expenditure Equilibrium
The aggregate expenditure function is formed by stacking on top of each other the consumption function (after taxes), the investment function, the government spending function, the export function, and the import function. The point at which the aggregate expenditure function intersects the vertical axis will be determined by the levels of investment, government, and export expenditures—which do not vary with national income. The upward slope of the aggregate expenditure function will be determined by the marginal propensity to save, the tax rate, and the marginal propensity to import. A higher marginal propensity to save, a higher tax rate, and a higher marginal propensity to import will all make the slope of the aggregate expenditure function flatter—because out of any extra income, more is going to savings or taxes or imports and less to spending on domestic goods and services.
The equilibrium occurs where national income is equal to aggregate expenditure, which is shown on the graph as the point where the aggregate expenditure schedule crosses the 45-degree line. In this example, the equilibrium occurs at 6,000. This equilibrium can also be read off the table under the figure; it is the level of national income where aggregate expenditure is equal to national income.
Equilibrium in the Keynesian Cross Model
With the aggregate expenditure line in place, the next step is to relate it to the two other elements of the Keynesian cross diagram. Thus, the first subsection interprets the intersection of the aggregate expenditure function and the 45-degree line, while the next subsection relates this point of intersection to the potential GDP line.
Where Equilibrium Occurs
The point where the aggregate expenditure line that is constructed from C + I + G + X – M crosses the 45-degree line will be the equilibrium for the economy. It is the only point on the aggregate expenditure line where the total amount being spent on aggregate demand equals the total level of production. In Figure 7, this point of equilibrium (E0) happens at 6,000, which can also be read off Table 3.
The meaning of "equilibrium" remains the same; that is, equilibrium is a point of balance where no incentive exists to shift away from that outcome. To understand why the point of intersection between the aggregate expenditure function and the 45-degree line is a macroeconomic equilibrium, consider what would happen if an economy found itself to the right of the equilibrium point E, say point H in Figure 8, where output is higher than the equilibrium. At point H, the level of aggregate expenditure is below the 45-degree line, so that the level of aggregate expenditure in the economy is less than the level of output. As a result, at point H, output is piling up unsold—not a sustainable state of affairs.
Figure 8. Equilibrium in the Keynesian Cross Diagram. If output was above the equilibrium level, at H, then the real output is greater than the aggregate expenditure in the economy. This pattern cannot hold, because it would mean that goods are produced but piling up unsold. If output was below the equilibrium level at L, then aggregate expenditure would be greater than output. This pattern cannot hold either, because it would mean that spending exceeds the number of goods being produced. Only point E can be at equilibrium, where output, or national income and aggregate expenditure, are equal. The equilibrium (E) must lie on the 45-degree line, which is the set of points where national income and aggregate expenditure are equal.
Conversely, consider the situation where the level of output is at point L—where real output is lower than the equilibrium. In that case, the level of aggregate demand in the economy is above the 45-degree line, indicating that the level of aggregate expenditure in the economy is greater than the level of output. When the level of aggregate demand has emptied the store shelves, it cannot be sustained, either. Firms will respond by increasing their level of production. Thus, the equilibrium must be the point where the amount produced and the amount spent are in balance, at the intersection of the aggregate expenditure function and the 45-degree line.
Table 4 gives some information on an economy. The Keynesian model assumes that there is some level of consumption even without income. That amount is $236 – $216 = $20. $20 will be consumed when national income equals zero. Assume that taxes are 0.2 of real GDP. Let the marginal propensity to save of after-tax income be 0.1. The level of investment is $70, the level of government spending is $80, and the level of exports is $50. Imports are 0.2 of after-tax income. Given these values, you need to complete Table 4 and then answer these questions:
What is the consumption function?
What is the equilibrium?
Why is a national income of $300 not at equilibrium?
How do expenditures and output compare at this point?
I + G + X
Aggregate Expenditures
Step 1. Calculate the amount of taxes for each level of national income(reminder: GDP = national income) for each level of national income using the following as an example:
[latex]\displaystyle \begin{array}{lr}National\;Income\;(Y)\; & \$300 \\ Taxes=0.2\;or\;20\% & \times0.2 \\ Tax\;amount\;(T) & \$60 \end{array}[/latex]
Step 2. Calculate after-tax income by subtracting the tax amount from national income for each level of national income using the following as an example:
[latex]\displaystyle \begin{array}{lr}National\;income\;minus\;taxes\; & \$300 \\ & -\;\$60 \\ After-tax\;income\; & \$240 \end{array}[/latex]
Step 3. Calculate consumption. The marginal propensity to save is given as 0.1. This means that the marginal propensity to consume is 0.9, since MPS + MPC = 1. Therefore, multiply 0.9 by the after-tax income amount using the following as an example:
[latex]\displaystyle \begin{array}{lr}After-tax\;Income\; & \$240 \\ MPC & \times 0.9 \\ Consumption\; & \$216 \end{array}[/latex]
Step 4. Consider why the table shows consumption of $236 in the first row. As mentioned earlier, the Keynesian model assumes that there is some level of consumption even without income. That amount is $236 – $216 = $20.
Step 5. There is now enough information to write the consumption function. The consumption function is found by figuring out the level of consumption that will happen when income is zero. Remember that:
[latex]C=Consumption\;when\;national\;income\;is\;zero\;+\;MPC\;(after-tax\;income)[/latex]
Let C represent the consumption function, Y represent national income, and T represent taxes.
[latex]\begin{array}{r @{{}={}} l}C & \$20+0.9(Y-T) \\ & \$20+0.9(\$300-\$60) \\ & \$236 \end{array}[/latex]
Step 6. Use the consumption function to find consumption at each level of national income.
Step 7. Add investment (I), government spending (G), and exports (X). Remember that these do not change as national income changes:
Step 8. Find imports, which are 0.2 of after-tax income at each level of national income. For example:
[latex]\displaystyle \begin{array}{lr}After-tax\;income\; & \$240 \\ Imports\;of\;0.2\;or\;20\%\;of\;Y-T\; & \times 0.2 \\ Imports\; & \$48 \end{array}[/latex]
Step 9. Find aggregate expenditure by adding C + I + G + X – I for each level of national income. Your completed table should look like Table 5.
National Income (Y)
Tax = 0.2 × Y (T)
After-tax income (Y – T)
Consumption C = $20 + 0.9(Y – T)
Minus Imports (M)
Aggregate Expenditures AE = C + I + G + X – M
$300 $60 $240 $236 $200 $48 $388
$500 $100 $400 $380 $200 $80 $500
$700 $140 $560 $524 $200 $112 $612
Step 10. Answer the question: What is equilibrium? Equilibrium occurs where AE = Y. Table 5 shows that equilibrium occurs where national income equals aggregate expenditure at $500.
Step 11. Find equilibrium mathematically, knowing that national income is equal to aggregate expenditure.
[latex]\begin{array}{r @{{}={}} l}Y & AE \\ & C+I+G+X-M \\ & \$20+0.9(Y-T)+\$70+\$80+\$50-0.2(Y-T) \\ &\$220+0.9(Y-T)-0.2(Y-T) \end{array}[/latex]
Since T is 0.2 of national income, substitute T with 0.2 Y so that:
[latex]\begin{array}{r @{{}={}} l}Y & \$220+0.9(Y-0.2Y)-0.2(Y-0.2Y) \\ & \$220+0.9Y-0.18Y-0.2Y+0.04Y \\ & \$220+0.56Y \end{array}[/latex]
Solve for Y.
[latex]\begin{array}{r @{{}={}} l}Y & \$220+0.56Y \\[0.5em] Y-0.56Y & \$220 \\[0.5em] 0.44Y & \$220 \\[0.5em] \frac { 0.44Y }{ 0.44 } & \frac { \$220 }{ 0.44 } \\[0.5em] Y & \$500 \end{array}[/latex]
Step 12. Answer this question: Why is a national income of $300 not an equilibrium? At national income of $300, aggregate expenditures are $388.
Step 13. Answer this question: How do expenditures and output compare at this point? Aggregate expenditures cannot exceed output (GDP) in the long run, since there would not be enough goods to be bought.
Recessionary and Inflationary Gaps
In the Keynesian cross diagram, if the aggregate expenditure line intersects the 45-degree line at the level of potential GDP, then the economy is in sound shape. There is no recession, and unemployment is low. But there is no guarantee that the equilibrium will occur at the potential GDP level of output. The equilibrium might be higher or lower.
For example, Figure 9 (a) illustrates a situation where the aggregate expenditure line intersects the 45-degree line at point E0, which is a real GDP of $6,000, and which is below the potential GDP of $7,000. In this situation, the level of aggregate expenditure is too low for GDP to reach its full employment level, and unemployment will occur. The distance between an output level like E0 that is below potential GDP and the level of potential GDP is called a recessionary gap. Because the equilibrium level of real GDP is so low, firms will not wish to hire the full employment number of workers, and unemployment will be high.
Figure 9. Addressing Recessionary and Inflationary Gaps. (a) If the equilibrium occurs at an output below potential GDP, then a recessionary gap exists. The policy solution to a recessionary gap is to shift the aggregate expenditure schedule up from AE0 to AE1, using policies like tax cuts or government spending increases. Then the new equilibrium E1 occurs at potential GDP. (b) If the equilibrium occurs at an output above potential GDP, then an inflationary gap exists. The policy solution to an inflationary gap is to shift the aggregate expenditure schedule down from AE0 to AE1, using policies like tax increases or spending cuts. Then, the new equilibrium E1 occurs at potential GDP.
What might cause a recessionary gap? Anything that shifts the aggregate expenditure line down is a potential cause of recession, including a decline in consumption, a rise in savings, a fall in investment, a drop in government spending or a rise in taxes, or a fall in exports or a rise in imports. Moreover, an economy that is at equilibrium with a recessionary gap may just stay there and suffer high unemployment for a long time; remember, the meaning of equilibrium is that there is no particular adjustment of prices or quantities in the economy to chase the recession away.
The appropriate response to a recessionary gap is for the government to reduce taxes or increase spending so that the aggregate expenditure function shifts up from AE0 to AE1. When this shift occurs, the new equilibrium E1 now occurs at potential GDP as shown in Figure 9 (a).
Conversely, Figure 9 (b) shows a situation where the aggregate expenditure schedule (AE0) intersects the 45-degree line above potential GDP. The gap between the level of real GDP at the equilibrium E0 and potential GDP is called an inflationary gap. The inflationary gap also requires a bit of interpreting. After all, a naïve reading of the Keynesian cross diagram might suggest that if the aggregate expenditure function is just pushed up high enough, real GDP can be as large as desired—even doubling or tripling the potential GDP level of the economy. This implication is clearly wrong. An economy faces some supply-side limits on how much it can produce at a given time with its existing quantities of workers, physical and human capital, technology, and market institutions.
The inflationary gap should be interpreted, not as a literal prediction of how large real GDP will be, but as a statement of how much extra aggregate expenditure is in the economy beyond what is needed to reach potential GDP. An inflationary gap suggests that because the economy cannot produce enough goods and services to absorb this level of aggregate expenditures, the spending will instead cause an inflationary increase in the price level. In this way, even though changes in the price level do not appear explicitly in the Keynesian cross equation, the notion of inflation is implicit in the concept of the inflationary gap.
The appropriate Keynesian response to an inflationary gap is shown in Figure 9 (b). The original intersection of aggregate expenditure line AE0 and the 45-degree line occurs at $8,000, which is above the level of potential GDP at $7,000. If AE0 shifts down to AE1, so that the new equilibrium is at E1, then the economy will be at potential GDP without pressures for inflationary price increases. The government can achieve a downward shift in aggregate expenditure by increasing taxes on consumers or firms, or by reducing government expenditures.
The Multiplier Effect
The Keynesian policy prescription has one final twist. Assume that for a certain economy, the intersection of the aggregate expenditure function and the 45-degree line is at a GDP of 700, while the level of potential GDP for this economy is $800. By how much does government spending need to be increased so that the economy reaches the full employment GDP? The obvious answer might seem to be $800 – $700 = $100; so raise government spending by $100. But that answer is incorrect. A change of, for example, $100 in government expenditures will have an effect of more than $100 on the equilibrium level of real GDP. The reason is that a change in aggregate expenditures circles through the economy: households buy from firms, firms pay workers and suppliers, workers and suppliers buy goods from other firms, those firms pay their workers and suppliers, and so on. In this way, the original change in aggregate expenditures is actually spent more than once. This is called the multiplier effect: An initial increase in spending, cycles repeatedly through the economy and has a larger impact than the initial dollar amount spent.
How Does the Multiplier Work?
To understand how the multiplier effect works, return to the example in which the current equilibrium in the Keynesian cross diagram is a real GDP of $700, or $100 short of the $800 needed to be at full employment, potential GDP. If the government spends $100 to close this gap, someone in the economy receives that spending and can treat it as income. Assume that those who receive this income pay 30% in taxes, save 10% of after-tax income, spend 10% of total income on imports, and then spend the rest on domestically produced goods and services.
As shown in the calculations in Figure 10 and Table 6, out of the original $100 in government spending, $53 is left to spend on domestically produced goods and services. That $53 which was spent, becomes income to someone, somewhere in the economy. Those who receive that income also pay 30% in taxes, save 10% of after-tax income, and spend 10% of total income on imports, as shown in Figure 10, so that an additional $28.09 (that is, 0.53 × $53) is spent in the third round. The people who receive that income then pay taxes, save, and buy imports, and the amount spent in the fourth round is $14.89 (that is, 0.53 × $28.09).
Figure 10. The Multiplier Effect. An original increase of government spending of $100 causes a rise in aggregate expenditure of $100. But that $100 is income to others in the economy, and after they save, pay taxes, and buy imports, they spend $53 of that $100 in a second round. In turn, that $53 is income to others. Thus, the original government spending of $100 is multiplied by these cycles of spending, but the impact of each successive cycle gets smaller and smaller. Given the numbers in this example, the original government spending increase of $100 raises aggregate expenditure by $213; therefore, the multiplier in this example is $213/$100 = 2.13.
Original increase in aggregate expenditure from government spending 100
Which is income to people throughout the economy: Pay 30% in taxes. Save 10% of after-tax income. Spend 10% of income on imports. Second-round increase of… 70 – 7 – 10 = 53
Which is $53 of income to people through the economy: Pay 30% in taxes. Save 10% of after-tax income. Spend 10% of income on imports. Third-round increase of… 37.1 – 3.71 – 5.3 = 28.09
Which is $28.09 of income to people through the economy: Pay 30% in taxes. Save 10% of after-tax income. Spend 10% of income on imports. Fourth-round increase of… 19.663 – 1.96633 – 2.809 = 14.89
Table 6. Calculating the Multiplier Effect
Thus, over the first four rounds of aggregate expenditures, the impact of the original increase in government spending of $100 creates a rise in aggregate expenditures of $100 + $53 + $28.09 + $14.89 = $195.98. Figure 10 shows these total aggregate expenditures after these first four rounds, and then the figure shows the total aggregate expenditures after 30 rounds. The additional boost to aggregate expenditures is shrinking in each round of consumption. After about 10 rounds, the additional increments are very small indeed—nearly invisible to the naked eye. After 30 rounds, the additional increments in each round are so small that they have no practical consequence. After 30 rounds, the cumulative value of the initial boost in aggregate expenditure is approximately $213. Thus, the government spending increase of $100 eventually, after many cycles, produced an increase of $213 in aggregate expenditure and real GDP. In this example, the multiplier is $213/$100 = 2.13.
Calculating the Multiplier
Fortunately for everyone who is not carrying around a computer with a spreadsheet program to project the impact of an original increase in expenditures over 20, 50, or 100 rounds of spending, there is a formula for calculating the multiplier.
[latex]Spending\;Multiplier = \frac { 1 }{ (1 - MPC \times(1-tax\;rate)+MPI)}[/latex]
The data from Figure 10 and Table 6 is:
Marginal Propensity to Save (MPS) = 30%
Tax rate = 10%
Marginal Propensity to Import (MPI) = 10%
The MPC is equal to 1 – MPS, or 0.7. Therefore, the spending multiplier is:
[latex]\begin{array}{r @{{}={}} l}Spending\;Multiplier & \frac { 1 }{ 1 - (0.7 - (0.10)(0.7) - 0.10)} \\[1em] & \frac { 1 }{ 0.47 } \\[1em] & 2.13 \end{array}[/latex]
A change in spending of $100 multiplied by the spending multiplier of 2.13 is equal to a change in GDP of $213. Not coincidentally, this result is exactly what was calculated in Figure 10 after many rounds of expenditures cycling through the economy.
The size of the multiplier is determined by what proportion of the marginal dollar of income goes into taxes, saving, and imports. These three factors are known as "leakages," because they determine how much demand "leaks out" in each round of the multiplier effect. If the leakages are relatively small, then each successive round of the multiplier effect will have larger amounts of demand, and the multiplier will be high. Conversely, if the leakages are relatively large, then any initial change in demand will diminish more quickly in the second, third, and later rounds, and the multiplier will be small. Changes in the size of the leakages—a change in the marginal propensity to save, the tax rate, or the marginal propensity to import—will change the size of the multiplier.
Calculating Keynesian Policy Interventions
Returning to the original question: How much should government spending be increased to produce a total increase in real GDP of $100? If the goal is to increase aggregate demand by $100, and the multiplier is 2.13, then the increase in government spending to achieve that goal would be $100/2.13 = $47. Government spending of approximately $47, when combined with a multiplier of 2.13 (which is, remember, based on the specific assumptions about tax, saving, and import rates), produces an overall increase in real GDP of $100, restoring the economy to potential GDP of $800, as Figure 11 shows.
Figure 11. The Multiplier Effect in an Expenditure-Output Model. The power of the multiplier effect is that an increase in expenditure has a larger increase on the equilibrium output. The increase in expenditure is the vertical increase from AE0 to AE1. However, the increase in equilibrium output, shown on the horizontal axis, is clearly larger.
The multiplier effect is also visible on the Keynesian cross diagram. Figure 11 shows the example we have been discussing: a recessionary gap with an equilibrium of $700, potential GDP of $800, the slope of the aggregate expenditure function (AE0) determined by the assumptions that taxes are 30% of income, savings are 0.1 of after-tax income, and imports are 0.1 of before-tax income. At AE1, the aggregate expenditure function is moved up to reach potential GDP.
Now, compare the vertical shift upward in the aggregate expenditure function, which is $47, with the horizontal shift outward in real GDP, which is $100 (as these numbers were calculated earlier). The rise in real GDP is more than double the rise in the aggregate expenditure function. (Similarly, if you look back at Figure 9, you will see that the vertical movements in the aggregate expenditure functions are smaller than the change in equilibrium output that is produced on the horizontal axis. Again, this is the multiplier effect at work.) In this way, the power of the multiplier is apparent in the income–expenditure graph, as well as in the arithmetic calculation.
The multiplier does not just affect government spending, but applies to any change in the economy. Say that business confidence declines and investment falls off, or that the economy of a leading trading partner slows down so that export sales decline. These changes will reduce aggregate expenditures, and then will have an even larger effect on real GDP because of the multiplier effect. Read the following Clear It Up feature to learn how the multiplier effect can be applied to analyze the economic impact of professional sports.
How can the multiplier be used to analyze the economic impact of professional sports?
Attracting professional sports teams and building sports stadiums to create jobs and stimulate business growth is an economic development strategy adopted by many communities throughout the United States. In his recent article, "Public Financing of Private Sports Stadiums," James Joyner of Outside the Beltway looked at public financing for NFL teams. Joyner's findings confirm the earlier work of John Siegfried of Vanderbilt University and Andrew Zimbalist of Smith College.
Siegfried and Zimbalist used the multiplier to analyze this issue. They considered the amount of taxes paid and dollars spent locally to see if there was a positive multiplier effect. Since most professional athletes and owners of sports teams are rich enough to owe a lot of taxes, let's say that 40% of any marginal income they earn is paid in taxes. Because athletes are often high earners with short careers, let's assume that they save one-third of their after-tax income.
However, many professional athletes do not live year-round in the city in which they play, so let's say that one-half of the money that they do spend is spent outside the local area. One can think of spending outside a local economy, in this example, as the equivalent of imported goods for the national economy.
Now, consider the impact of money spent at local entertainment venues other than professional sports. While the owners of these other businesses may be comfortably middle-income, few of them are in the economic stratosphere of professional athletes. Because their incomes are lower, so are their taxes; say that they pay only 35% of their marginal income in taxes. They do not have the same ability, or need, to save as much as professional athletes, so let's assume their MPC is just 0.8. Finally, because more of them live locally, they will spend a higher proportion of their income on local goods—say, 65%.
If these general assumptions hold true, then money spent on professional sports will have less local economic impact than money spent on other forms of entertainment. For professional athletes, out of a dollar earned, 40 cents goes to taxes, leaving 60 cents. Of that 60 cents, one-third is saved, leaving 40 cents, and half is spent outside the area, leaving 20 cents. Only 20 cents of each dollar is cycled into the local economy in the first round. For locally-owned entertainment, out of a dollar earned, 35 cents goes to taxes, leaving 65 cents. Of the rest, 20% is saved, leaving 52 cents, and of that amount, 65% is spent in the local area, so that 33.8 cents of each dollar of income is recycled into the local economy.
Siegfried and Zimbalist make the plausible argument that, within their household budgets, people have a fixed amount to spend on entertainment. If this assumption holds true, then money spent attending professional sports events is money that was not spent on other entertainment options in a given metropolitan area. Since the multiplier is lower for professional sports than for other local entertainment options, the arrival of professional sports to a city would reallocate entertainment spending in a way that causes the local economy to shrink, rather than to grow. Thus, their findings seem to confirm what Joyner reports and what newspapers across the country are reporting. A quick Internet search for "economic impact of sports" will yield numerous reports questioning this economic development strategy.
Multiplier Tradeoffs: Stability versus the Power of Macroeconomic Policy
Is an economy healthier with a high multiplier or a low one? With a high multiplier, any change in aggregate demand will tend to be substantially magnified, and so the economy will be more unstable. With a low multiplier, by contrast, changes in aggregate demand will not be multiplied much, so the economy will tend to be more stable.
However, with a low multiplier, government policy changes in taxes or spending will tend to have less impact on the equilibrium level of real output. With a higher multiplier, government policies to raise or reduce aggregate expenditures will have a larger effect. Thus, a low multiplier means a more stable economy, but also weaker government macroeconomic policy, while a high multiplier means a more volatile economy, but also an economy in which government macroeconomic policy is more powerful.
Key Concepts and Summary
The expenditure-output model or Keynesian cross diagram shows how the level of aggregate expenditure (on the vertical axis) varies with the level of economic output (shown on the horizontal axis). Since the value of all macroeconomic output also represents income to someone somewhere else in the economy, the horizontal axis can also be interpreted as national income. The equilibrium in the diagram will occur where the aggregate expenditure line crosses the 45-degree line, which represents the set of points where aggregate expenditure in the economy is equal to output (or national income). Equilibrium in a Keynesian cross diagram can happen at potential GDP, or below or above that level.
The consumption function shows the upward-sloping relationship between national income and consumption. The marginal propensity to consume (MPC) is the amount consumed out of an additional dollar of income. A higher marginal propensity to consume means a steeper consumption function; a lower marginal propensity to consume means a flatter consumption function. The marginal propensity to save (MPS) is the amount saved out of an additional dollar of income. It is necessarily true that MPC + MPS = 1. The investment function is drawn as a flat line, showing that investment in the current year does not change with regard to the current level of national income. However, the investment function will move up and down based on the expected rate of return in the future. Government spending is drawn as a horizontal line in the Keynesian cross diagram, because its level is determined by political considerations, not by the current level of income in the economy. Taxes in the basic Keynesian cross diagram are taken into account by adjusting the consumption function. The export function is drawn as a horizontal line in the Keynesian cross diagram, because exports do not change as a result of changes in domestic income, but they move as a result of changes in foreign income, as well as changes in exchange rates. The import function is drawn as a downward-sloping line, because imports rise with national income, but imports are a subtraction from aggregate demand. Thus, a higher level of imports means a lower level of expenditure on domestic goods.
In a Keynesian cross diagram, the equilibrium may be at a level below potential GDP, which is called a recessionary gap, or at a level above potential GDP, which is called an inflationary gap.
The multiplier effect describes how an initial change in aggregate demand generated several times as much as cumulative GDP. The size of the spending multiplier is determined by three leakages: spending on savings, taxes, and imports. The formula for the multiplier is:
[latex]Multiplier = \frac {1}{1-(MPC \times (1-tax\;rate)+MPI)}[/latex]
An economy with a lower multiplier is more stable—it is less affected either by economic events or by government policy than an economy with a higher multiplier.
Self-Check Questions
Sketch the aggregate expenditure-output diagram with the recessionary gap.
Sketch the aggregate expenditure-output diagram with an inflationary gap.
An economy has the following characteristics:
[latex]Y = National\;income[/latex]
[latex]Taxes = T = 0.25Y[/latex]
[latex]C = Consumption = 400 + 0.85(Y-T)[/latex]
[latex]I = 300[/latex]
[latex]G = 200[/latex]
[latex]X = 500[/latex]
[latex]M = 0.1(Y-T)[/latex]
Find the equilibrium for this economy. If potential GDP is 3,500, then what change in government spending is needed to achieve this level? Do this problem two ways. First, plug 3,500 into the equations and solve for G. Second, calculate the multiplier and figure it out that way.
Table 7 represents the data behind a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income; the MPC out of the after-tax income is 0.8; investment is $2,000; government spending is $1,000; exports are $2,000 and imports are 0.05 of after-tax income. What is the equilibrium level of output for this economy?
Minus Imports
Explain how the multiplier works. Use an MPC of 80% in an example.
What is on the axes of an expenditure-output diagram?
What does the 45-degree line show?
What determines the slope of a consumption function?
What is the marginal propensity to consume, and how is it related to the marginal propensity to import?
Why are the investment function, the government spending function, and the export function all drawn as flat lines?
Why does the import function slope down? What is the marginal propensity to import?
What are the components on which the aggregate expenditure function is based?
Is the equilibrium in a Keynesian cross diagram usually expected to be at or near potential GDP?
What is an inflationary gap? A recessionary gap?
What is the multiplier effect?
Why are savings, taxes, and imports referred to as "leakages" in calculating the multiplier effect?
Will an economy with a high multiplier be more stable or less stable than an economy with a low multiplier in response to changes in the economy or in government policy?
How do economists use the multiplier?
What does it mean when the aggregate expenditure line crosses the 45-degree line? In other words, how would you explain the intersection in words?
Which model, the AD/AS or the AE model better explains the relationship between rising price levels and GDP? Why?
What are some reasons that the economy might be in a recession, and what is the appropriate government action to alleviate the recession?
What should the government do to relieve inflationary pressures if the aggregate expenditure is greater than potential GDP?
Two countries are in a recession. Country A has an MPC of 0.8 and Country B has an MPC of 0.6. In which country will government spending have the greatest impact?
Compare two policies: a tax cut on income or an increase in government spending on roads and bridges. What are both the short-term and long-term impacts of such policies on the economy?
What role does government play in stabilizing the economy and what are the tradeoffs that must be considered?
If there is a recessionary gap of $100 billion, should the government increase spending by $100 billion to close the gap? Why? Why not?
What other changes in the economy can be evaluated by using the multiplier?
Joyner, James. Outside the Beltway. "Public Financing of Private Sports Stadiums." Last modified May 23, 2012. http://www.outsidethebeltway.com/public-financing-of-private-sports-stadiums/.
Siegfried, John J., and Andrew Zimbalist. "The Economics of Sports Facilities and Their Communities." Journal of Economic Perspectives. no. 3 (2000): 95-114. http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.14.3.95.
Answers to Self-Check Questions
The following figure shows the aggregate expenditure-output diagram with the recessionary gap.
The following figure shows the aggregate expenditure-output diagram with an inflationary gap.
First, set up the calculation.
[latex]\begin{array}{r @{{}={}} l}AE & 400+0.85(Y-T)+300+200+500-0.1(Y-T) \\ AE & Y \end{array}[/latex]
Then insert Y for AE and 0.25Y for T.
[latex]\begin{array}{r @{{}={}} l}Y & 400+0.85(Y-0.25Y)+300+200+500-0.1(Y-0.25Y) \\ Y & 1400+0.6375Y-0.075Y \\ 0.4375Y & 1400 \\ Y & 3200 \end{array}[/latex]
If full employment is 3,500, then one approach is to plug in 3,500 for Y throughout the equation, but to leave G as a separate variable.
[latex]\begin{array}{r @{{}={}} l}Y & 400+0.85(Y-0.25Y)+300+G+500+0.1(Y-0.25Y) \\ 3500 & 400+0.85(3500-0.25(3500))+300+G+500+0.1(3500-0.25(3500) \\ G & 3500-400-2231.25-1300-500+262.5 \\ G & 331.25 \end{array}[/latex]
A G value of 331.25 is an increase of 131.25 from its original level of 200.
Alternatively, the multiplier is that, out of every dollar spent, 0.25 goes to taxes, leaving 0.75, and out of after-tax income, 0.15 goes to savings and 0.1 to imports. Because (0.75)(0.15) = 0.1125 and (0.75)(0.1) = 0.075, this means that out of every dollar spent: 1 –0.25 –0.1125 –0.075 = 0.5625.
Thus, using the formula, the multiplier is:
[latex]\frac { 1 }{ 1-0.5625 } = 2.2837[/latex]
To increase equilibrium GDP by 300, it will take a boost of 300/2.2837, which again works out to 131.25.
The following table illustrates the completed table. The equilibrium is level is italicized.
$10,000 $6,000 $5,300 $5,000 $300 $10,000
$13,000 $7,800 $46,740 $5,000 $4,390 $11,350
The alternative way of determining equilibrium is to solve for Y, where Y = national income, using: [latex]Y=AE=C+I+G+X-M[/latex]
[latex]Y=\$500+0.8(Y-T)+\$2,000+\$1,000+\$2,000-0.05(Y-T)[/latex]
Solving for Y, we see that the equilibrium level of output is Y = $10,000.
The multiplier refers to how many times a dollar will turnover in the economy. It is based on the Marginal Propensity to Consume (MPC) which tells how much of every dollar received will be spent. If the MPC is 80% then this means that out of every one dollar received by a consumer, $0.80 will be spent. This $0.80 is received by another person. In turn, 80% of the $0.80 received, or $0.64, will be spent, and so on. The impact of the multiplier is diluted when the effect of taxes and expenditure on imports is considered. To derive the multiplier, take the 1/1 – F; where F is equal to percent of savings, taxes, and expenditures on imports.
Previous: Appendix C: Present Discounted Value
Principles of Economics by Rice University is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.


Please help me welcome Anne Barwell! She's here to talk about her latest release, On Wings of Song, and some of the history behind it.
Although On Wings of Song begins with the 1914 Christmas Truce, most of the story takes place six years later in 1920. People were still coming to terms with their experiences during the war. Those who hadn't fought had still lost someone they cared about, or had them return either maimed or a very different person than had left to fight at the Front. Toward the end of the war, in 1918, the influenza epidemic struck, killing more people than the war.
In Germany people were starving. Inflation coupled with the debt incurred by the Treaty of Versailles, was also taking its toll. In Britain the war had begun to break down some of the class barriers, at least for some, although for others it wasn't about to change anytime soon, if ever. It was also time of growth and relative prosperity, as the economy broke down later there, in the late 1920s.
So how to get Jochen—a German—to Britain in 1920? One of my betas and I were discussing this over tea break at work one day, and a colleague suggested the solution. Enter his great-aunt Wilhelmina, the black sheep of the Weber family who had married a British man and settled there. She dies and leaves Jochen an inheritance.
But anti-German feeling is running high, and while Jochen's English is excellent, his accent gives away his origins. Dealing with that on top of post war trauma is not easy—it's not meant to be. Aiden's injuries might be physical as well as psychological but that does not mean that Jochen has escaped the war unscathed.
One of the reasons I wrote On Wings of Song is that I wanted to show both sides of the war, rather than take sides one way or the other. No one truly wins a war and huge costs are paid by both sides. The 1914 truce reminded each side of a shared humanity. This story brings together two men who find they have a lot in common despite having fought a war on opposite sides.
This entry was posted in For Your Reading Pleasure and tagged Anne Barwell, Dreamspinner Press, Guest Author, historical, MM Romance by Charley Descoteaux. Bookmark the permalink.
Thanks again for hosting me, Charley.


The road includes four urban junctions and connections with the interstate highways, and consists of two carriageways of five lanes each, of which three are express lanes and two are for local traffic; it also has 15 free-flowing toll points.
Project Finance magazine awarded the highway the "Latin American Transport Deal of the Year 2004" award because it was the first time that the Chilean government applied income distribution to a concession and that a bank co-financed a toll road along with investors in Chilean bonds.
The advantages of this system include: traffic flow along the highway under concession, as well as on the roads not under concession in the area; users can drive along any highway under concession in Santiago or intercity thoroughfares that have this system, using a single tag; a significant reduction in pollution levels, compared to traditional traffic systems.


It is that time of year again: another installment of the PC Perspective Hardware Workshop! Once again we will be presenting on the main stage at Quakecon 2012 being held in Dallas, TX August 2-5th.
Our primary partners at the event are those that threw in for our ability to host the workshop at Quakecon and for the hundreds of shirts we have ready to toss out! Our thanks to NVIDIA, MSI Computer and Corsair!!
Along with the Hardware Workshop, PC Perspective is working with Modders Inc on the annual case mod contest! There are two categories for the competition: "Scratch Built" and "In the Box" that will allow those that build their computer enclosures from the ground up to compete separately from those that heavily modify their existing cases and systems.
For more details, be sure to check out the on going thread at the Modders Inc Forums!
Preface: If you prefer a video version, you can check out a video walkthrough of Windows 8 RTM with commentary. For those that want a written preview, I have attempted to break the article up into sizeable chunks. The first part is the introduction and "what's new" regarding getting it set up versus our guide for installing the Consumer Preview. The following sections are for showing off desktop applications and metro/Windows 8 Style UI apps. Finally, a short conclusion and general impressions section as well as some questions for you to answer should you want to join the discussion. Once again, I've gone with a more informal voice for the preview as there is a lot of opinion in here, this is by no means a full review!
Needless to say, the news that the RTM had leaked piqued my interest, so I set out to get my hands on it (and report my findings). I managed to find a non-bootable image called "MICROSOFT.WINDOWS.8.ENTERPRISE-N.RTM.X64.VOLUME.ENGLISH.NON_BOOT_DVD-SAMOVARWZT" (wow that's a long file name) that seemed to check out as being legitimate. I then took that 6.05 GB folder and used the files to do a clean install from a Windows 7 x64 virtual machine I had around for testing just this sort of thing.
A New Dawn of a new era: NVIDIA tech demo reboot.
NVIDIA has released a demo for their latest GPUs which might be a little familiar for long-time PC gamers. A New Dawn is a remake of their Dawn demo for the GeForce FX line of graphics processors -- now with less fake Subsurface Scattering.
What better way to gratify your purchases than scantily clad demihumans?
It has been just months shy of a decade ago when NVIDIA revealed Dawn to attendees of the 2002 Game Developer's Conference. Dawn, titled after both lead character as well as setting, was set to promote NVIDIA's GeForce FX line of graphics processors.
Less lensflare than a dance-pop video.
Every day I'm fluttering -- ROFL.
A New Dawn demonstrates the progression between early-stage DirectX 9 through current DirectX 11.1 hardware. Dawn has been remodeled and reskinned with actual subsurface scattering to liven up her skin; fine-grained hair with blur shaders to prevent aliasing; and certainly no extra clothing. Her environment is modeled and tessellated -- a step up from the box she used to reside in.
A New Dawn is available for download from NVIDIA's website if your system meets the minimum specifications -- which, if you have a Kepler GPU, is quite forgiving for a system that a Kepler GPU would make sense to be in.
E3 12: Unreal Engine 4 -- What you (and we) missed at GDC.
Epic has released as much of their GDC demo as they are able to in an effort to end E3 2012 with a bang. They have included a second video to walk through the engine for developers to enjoy. We will explain to the masses why it is awesome.
Before we go any further -- the video you have been waiting months to see.
Be prepared for a particle-filled generation.
As was the case with Intel's sand-to-CPU video -- the demo is pleasing but the supplementary info is the prize.
Epic released a 10 minute developer walkthrough to highlight the most important features of Unreal Engine 4. You can see it below and read on to see what that all means.
Yes, Unrealscript did not make it to Unreal Engine 4.
The first major feature of the engine is real-time dynamic global illumination and glossy specular reflection. Traditional video game graphics only considers the first bounce of light from a source -- if that bounce does not reach the player camera then it does not exist. Global illumination allows objects to be lit not just by light sources but also by light bouncing from neighboring objects.
It has been very popular to calculate how light interacts with objects ahead of time for the last generation as well as a portion of the generation prior to that. With those methods you are able to soften the shadows cast by light and make the scene feel much more naturally lit. The problem arises when anything in the scene moves or changes as obviously happens in a video game.
Unreal Engine 4 has the ability to calculate Global Illumination in real time. Dynamic lights such as muzzle flashes or flames are able to not just illuminate the area around them but also induce that area around it to light each other.
Also, static sources such as moonlight shining in the window against the floor can bounce from the floor and slightly lighten the walls with a bluish tint without being calculated ahead of time. Developers can try lighting effects without waiting for sometimes hours to see the results. This also means that what would have been once a pre-computed lit scene with nothing moving can now be destroyed and still remain properly lit. And now the moon can even move if the designer wants.
Diffuse material on the gold statue, notice how the floor lighting from the statue desaturates and changes.
In this scene we see how light can reflect against a statue and influence the objects around it. A specular material has a much smoother and more mirror-like surface than a diffuse material which tends to scatter light in all directions. If you were to shine a laser against a mirror the beam would bounce and you would not see it unless you were in the reflected path whereas if you shine the laser against the wall you would see a dot regardless of how you look at it. This is because the wall, like a projector screen, is like trillions of microscopic mirrors all pointed in different directions which each take a tiny fraction of the light and sends it in a different direction.
In Unreal Engine 4, this effect means that a shiny surface will not only glare if you look at it but also light the objects around it differently than a diffuse surface. You can see that effect against the floor.
Read on after the break to continue with the discussion of Unreal Engine 4 features.


Migration does not only cause disruption (uprooting and relocating) but also connection (adapting to new surroundings and realities, including linguistic ones). This panel is interested in the linguistic heritages that evolve among Africans in migratory and transnational contexts.
Migration does not only cause disruption (uprooting and relocating) but also connection (adapting to new surroundings and realities, including linguistic ones). The movement of African migrants into new environments presents new challenges of identity struggle both in terms of retaining their African heritage and identities and assuming or adapting to new identities of their new environments. This panel is interested in the linguistic heritages that evolve among Africans in migratory and transnational contexts. What role does language play in the ways African immigrants and transnationals experience the processes of uprooting, relocation, as well as the negotiation and construction of identities in their new contexts? The constituent papers in this panel will investigate (1) linguistic repertoires that reflect individual/group trajectories in African migratory/transnational contexts; and (2) heterogenous worlds and discourses about language and language practices in African migratory /transnational contexts.


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Police arrest 70-year-old man in death of woman found in Burlington, Ont., apartment
January 14, 2023, 2:31 p.m. ·1 min read
Halton Regional police say a 70-year-old man has been arrested after a woman was found dead in her Burlington, Ont., apartment.
Police say officers were called to a home late Friday morning for reports of an unconscious woman in the unit.
The force says it found the woman inside and pronounced her dead.
Police say an investigation led to the arrest of a 70-year-old man and charges against him are pending.
The Halton Regional Police Homicide Unit has taken over the investigation and says it will provide more details at a later date, but the woman's name will not be released at her family's request.
Police say the incident was isolated to the apartment and there is no threat to public safety.
This report by The Canadian Press was first published Jan. 14, 2023.
Finnish, Swedish FMs: NATO membership process hasn't stopped
HELSINKI (AP) — The foreign ministers of Sweden and Finland reiterated in separate interviews published Saturday that the process for the two Nordic nations to join NATO is continuing despite Turkey's president saying Sweden shouldn't expect his country to approve its membership. Swedish Foreign Minister Tobias Billström acknowledged in an interview with Swedish newspaper Expressen that Turkish anger over recent demonstrations and the burning of the Quran in front of the Turkish Embassy in Stock
BEIJING (Reuters) -Lunar New Year holiday trips inside China surged 74% from last year after authorities scrapped COVID-19 travel curbs, state media reported on Saturday, though the number of journeys was still only half of pre-pandemic levels. Between Jan. 20-26, a week that overlapped with six days of the holiday period, China registered 6,364 COVID-linked deaths, the Center for Disease Control and Prevention said on Saturday, compared to 12,658 a week earlier. Lunar New Year is the most important holiday of the year in China, when huge numbers of people working in prosperous coastal cities head to their hometowns and villages for family reunions.
BUENOS AIRES (Reuters) -German Chancellor Olaf Scholz on Saturday urged a swift conclusion to talks on a free trade deal between the European Union and the Mercosur South American trade bloc, on the first stop in Buenos Aires of his inaugural tour of the region. Seeking to reduce Germany's economic reliance on China, diversify its trade and strengthen relations with democracies worldwide, Scholz is visiting Argentina, Chile and Brazil, all led by fellow leftists who came to power in the region's new "pink tide."
Someone call Guy Fieri — this B.C. diner serves Canadian and Chinese classics in a lumber yard
"Our house is your house." That's the motto of Northern Cafe, which was recently named the top place to eat in Canada by review site Yelp. The café, which sits on the banks of the Fraser River near the Knight Street Bridge in south Vancouver, is tucked away on top of a hardware store in the middle of a lumber yard. A narrow staircase can be found at 1640 East Kent Ave. South that customers have been climbing for over 60 years so they can plop into red vinyl booths and dig into classic diner eats
Israel's government says a power imbalance has given judges and legal advisers too much sway over law-making and governance. Prime Minister Benjamin Netanyahu has pledged to press on with the changes despite the opposition.View on euronews
US population center trending toward South this decade
ORLANDO, Fla. (AP) — The U.S. population center is on track this decade to take a southern swerve for the first time in history, and it's because of people like Owen Glick, who moved from California to Florida more than a year ago. Last year, the South outgrew other U.S. regions by well over 1 million people through births outpacing deaths and domestic and international migration, according to population estimates from the U.S. Census Bureau. The Northeast and Midwest lost residents, and the Wes
Virus that killed around 100 crows in Chatham-Kent isn't something to worry about: expert
Crows have become a celebrated bird in Chatham-Kent, but in recent weeks an alarming amount of crow deaths has caught the attention of pathologists in southern Ontario. Brian Stevens, a veterinary pathologist with the Canadian Wildlife Health Cooperative, told CBC News his team hasn't received their full lab results yet but they believe the crows are likely dying from an avian reovirus. He said it's "a virus that attacks these crows, attacks their internal organs, especially their intestinal tra
Violent incidents on TTC continue into weekend
A pair of violent incidents on Friday and another assault on Saturday continued the disturbing trend of violence on the TTC. Ahmar Khan reports.
Sciences Po, one of France's top universities, has banned the use of ChatGPT, an artificial intelligence-based chatbot that can generate coherent prose, to prevent fraud and plagiarism. ChatGPT is a free programme that generates original text about virtually any subject in response to a prompt, including articles, essays, jokes and even poetry, raising concerns across industries about plagiarism. The university said on Friday the school had emailed all students and faculty announcing a ban on ChatGPT and all other AI-based tools at Sciences Po.
MILAN (AP) — AC Milan's woeful start to the year went from bad to worse on Sunday, potentially putting title-winning coach Stefano Pioli's job at risk. Milan was humiliated 5-2 at San Siro by Sassuolo to leave the defending champion without a win in its past six matches. Next up is the Serie A derby against fierce rival Inter Milan next Sunday. It was the first time in Milan's history that it has conceded four goals in successive Serie A matches after losing 4-0 at Lazio midweek. It was also the
Palestinian teen wounds two people in east Jerusalem, day after another attack killed seven
More unrest in Jerusalem after a Palestinian teenager opened fire near the historic city on Saturday morning.View on euronews
Video released Friday shows the husband of former U.S. House Speaker Nancy Pelosi struggling with his assailant for control of a hammer moments before he was struck in the head during a brutal attack in the couple's San Francisco home last year. Police body-camera footage shows David DePape wrest the tool from Paul Pelosi, 82, and lunge toward him with the weapon over his head. The blow to Pelosi occurs out of the camera's view and the officers — one of them cursing — rush into the house and one
Latest news bulletin | January 29th – Morning

redpajama_set_name: RedPajamaCommonCrawl


That quotation was shared recently on Facebook by a good friend of mine. I posted a response ("True, silence can be awkward, of course, but it can be lovely.") and went on with my day. But somehow, I kept coming back to the topic of silence, and to the idea of there being more than just these two kinds, comfortable and awkward.
I hope we all know the first of these; the gentle sense of being with someone and having no need for words. I say gentle, but at times it can come upon us like a wave: the simple yet so rare awareness of sharing the moment without needing to explain or talk it away.
There is a beautiful scene near the start of the submarine movie Crimson Tide. Captain Frank Ramsey (Gene Hackman) is talking to his executive officer, Lieutenant Commander Ron Hunter (Denzel Washington), as they head out of port watching the sunset.
On the other side of the coin, of course, is the tense, cut-the-air-with-a-knife silence we have probably all experienced at some time in our lives, whether in our own relationships or as a witness, perhaps in our parental home. These silences can last for minutes, or hours, or longer. If occasional or of short duration they can give the relationship a useful pause. Not everything needs to be addressed in the moment. Things can then pick up again on the other side. But, if left unaddressed for long, these kinds of silence can take root.
Then there is the distinction between silence vs. background sounds. My friend Roiben who shared the silence quotation on Facebook is severely deaf. The nature of the sound landscape in which she finds herself can dramatically affect her ability to hear and engage with people and what is going on around her.
I find absolute silence uncomfortable. I write and think best, for example, in a café or coffee shop with plenty of ambient sound. Likewise, I cannot easily fall asleep without a tv or radio on in the background. Silence allows my mind to wander and distract me from falling asleep. If there is something quiet on the tv or radio – dialogue rather than music or action movies (disaster documentaries work really well for me!) – my mind has something to focus on, from which it can gently disengage and ease into sleep. Other friends prefer quiet or silence to relax. Fran is one of them. She can meditate in silence, for example, whereas I prefer a soundtrack of some kind, whether words or music.
There is yet another kind of silence, which occurs as a pause or gap in the connection between two people. Whatever its nature, every relationship has its natural frequency and intensity when it comes to connection. It may change from time to time but it is a function of the two people involved. Expecting the same level of contact and conversation from everyone we hold dear is a recipe for frustration and hurt.
I do much better where there is on-going contact; be that in person, on the phone, or online in chat or on social media. I'm in touch with several friends on a more or less daily basis. There are a few where it's more like weekly; very few where we connect less frequently than that. In that way, we keep in step with each other's lives, news, feelings, joys and issues. Not all the connections are the same, of course. Some are rich and full, others less intense yet no less valuable or valued.
I recently attended a Wellness Recovery Action Plan (WRAP) Awareness workshop. As part of that exercise I started to work with some of my triggers. Triggers are things that can affect our wellbeing and stability in ways that are – on the surface at least – out of proportion to the reality of what has actually happened. My biggest trigger is where I sense a (real or imagined) lessening in the frequency or intensity of the connection I have with someone close to me. Maybe they are not chatting as much or as often, or seem less engaged than usual.
There might be any number of reasons for this. Perhaps they are busy, or unwell. Maybe they have things going on for them of which I am unaware. Perhaps they simply want to step back for a while from connecting with people in general, or from me in particular. These are all perfectly valid reasons and whilst I might not like it I can respect and understand them. However, my triggered response is a powerful sense of rejection and abandonment out of all proportion to whatever is actually happening. (I have no idea where this comes from, it occurred for the first time maybe a dozen years ago.) It can feel overwhelming to me and can be devastating to the relationship unless it is acknowledged and allowed to pass safely.
I am working on this issue at the moment; learning to accept and to even appreciate the spaces between meetings, messages or phone calls, or times where things appear to change for a time. I am experimenting with allowing my feelings to be there without jumping to (mostly erroneous) conclusions or assuming the relationship is in jeopardy and thus putting it in jeopardy by responding inappropriately, or demanding more from the other person than they are able or willing to provide.
And (whisper it) that is a beautiful thing.


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TENNIUM WILL MANAGE THE BARCELONA OPEN BANC SABADELL THE NEXT THREE YEARS
BARCELONA, SPAIN – APRIL 28: ATP Barcelona Open Banc Sabadell at the Real Club de Tenis Barcelona on April 29, 2019 in Barcelona, Spain. (Photo by Pedro Salado)
Barcelona, 29th november 2019
The plenary session of the Board of Directors of the Real Club de Tenis Barcelona (RCTB), with its president Jordi Cambra and the CEO of the Tournament, Xavier Pujol, have decided to assign to the company Tennium the tender for the organization of the Barcelona Open Banc Sabadell the next three years from the 2021 edition.
The call for proposals and analysis of the proposals began on May 15 and has lasted for six months. With this tender, the RCTB culminates one of the transformation milestones of the club that the board aspired to elucidate as soon as possible in order to face the future according to the important evolution that the world of tennis and sports competitions is experiencing in the last years.
The tournament that in 2019 had an economic impact of 50 million Euros and received about 100,000 spectators, is one of the competitions on clay that has more history and tradition at an international level and in which the best players of the world participate on this surface.
Initially there have been six candidate companies that have offered very high level projects. To make this important decision for the future of this emblematic tournament, the Board has taken into consideration the curriculums of the candidate companies and their experience in organizing major sporting events, and especially tennis. In addition, it has had a significant weight both the economic proposal to the club and innovative ideas about the business model of the tournament. Additionally, the company's previous professional links with both the ATP and the Club itself have been taken into account.
However, the most valued aspect by the Board in the proposals of the candidates has been in the interpretation of the future of the tournament, considering the important transformation that society, sport and business is experiencing as a result of the technological innovation that has been seen reflected in an important way in the world of tennis and high competition.
In this sense Xavier Pujol, CEO of the Tournament, commented that "The Board of Directors and the entire Steering Committee of the Barcelona Open Banc Sabadell have the firm determination to work to turn this event into the best international tennis tournament in their segment by offering to the spectator a unique tennis and leisure experience."
Jordi Cambra, president of the RCTB, only has words of gratitude to the IMG company that has acted as organizer of the event for the last 29 years: "on behalf of the Board of Directors and the members of this club, I want to convey to IMG our most sincere gratitude for the great work displayed year after year, thanks to which, this emblematic competition of the club and the city of Barcelona, has gained international relevance until it became a reference tennis event at a global level."
Cambra has added "I want to thank as president, but also as a former player and fan all the people and executives of the IMG Company that at some point in their life have participated in the organization of the Barcelona Open Banc Sabadell, for all of them our most heartfelt tribute."
Likewise, Jordi Cambra has highlighted the professional attitude and predisposition of the winning candidate at all times of the tender, "we have total confidence in the Tennium team that in the course of the long and difficult tender have shown their enthusiasm at all times and intense commitment to the tournament."
In this sense, Xavier Pujol has added that "their original and solid ideas to take the tournament to higher levels of quality, such as the interesting business model proposed, represent an important transformation in line with the evolution of the highest level tennis competitions." Pujol concludes by pointing out that "these premises have led us to the conclusion that the new operator will mean a significant improvement of the tournament both in terms of income and benefits, with the view always on getting the best possible tennis tournament for the club and for the city of Barcelona and of maximum international projection."
Tennium is a global tennis platform that has its headquarters in Barcelona and is present in Argentina, Belgium and the United States. Tennium owns the ATP 250 European Open tournaments in Antwerp, Belgium and the ATP 250 Argentina Open in Buenos Aires, as well as the Senior Masters Cup in Spain. Tennium has its high performance centre for tennis players in Boca Raton, Florida and represents a select group of ATP, WTA players as well as young talent. The Tennium team is led by Kristoff Puelinckx, founder and CEO, former world number 4 and current French Davis Cup Captain, Sebastien Grosjean and partners, Martin Hughes, Joaquín Ríos, Juan De Dios Aguirre and Enric Molina.
The CEO and founder of Tennium, Kristoff Puelinckx, has declared "it is an honour that the RCTB and its board of directors have placed their trust in Tennium as a partner for the organization of the prestigious Barcelona Open Banc Sabadell tournament," and added "We are very grateful to the club and its members for choosing us among such a select group of candidates and very excited to contribute our knowledge and global vision in the world of tennis to the experienced team of the club, to develop and evolve the tournament so that the Trofeo Conde de Godó continues being an referent in the ATP Tour."
More information: https://www.barcelonaopenbancsabadell.com/en/news/tennium-will-manage-barcelona-open-banc-sabadell-next-three-years


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redpajama_set_name: RedPajamaGithub


Duration is a destination farmhouse brewery being set up in Norfolk by Miranda and former Brew by Numbers Head Brewer, Bates. They will focus on fresh and sour beers with a strong Belgo-American influence.
We are showcasing the first two beers to be released as part of their 'Roots Range' which is being brewed nomadically at Amundsen Bryggeri in Oslo, Norway.
Join us on Thursday 11th October with Miranda at Mother Kelly's Bethnal Green for the first glimmer of many good beers to come from Duration.


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Тамди́нський сільський округ (, ) — адміністративна одиниця у складі Алгинського району Актюбинської області Казахстану. Адміністративний центр — село Тамди.

Населення — 2603 особи (2009; 2576 в 1999).

Склад
До складу округу входять такі населені пункти:

Примітки

Сільські округи Алгинського району

redpajama_set_name: RedPajamaWikipedia


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