...1 Module 4 Assignment 2: The Multiplier Effect The Multiplier Effect Amanda M. Diehl Argosy University Macroeconomics: ECO201 A02 2 Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment, though at a slower pace, and remain reluctant to add to payrolls; they continue to make progress in bringing inventory stocks into better alignment with sales. Financial market conditions have become more supportive of economic growth. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability. (Governors, 2009). From what I can see, the Federal Reserve’s use of open-market operations to influence the money supply is done by increasing the inflation-adjusted market value of the goods and services produced by an economy over time. The more consumers pay for goods and necessities the more profit is made. As this is a great way of going about it, this is also what keeps some consumers from buying products they need due to it not being something their finances can handle. This means...
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...Empirical Evidence for Germany Oliver Holtem¨ ller∗ o November 2002 Abstract This paper contributes to the analysis of the money supply process in Germany during the period of monetary targeting by the Bundesbank from 1975-1998. While the standard money multiplier approach assumes that the money stock is determined by the money multiplier and the monetary base it is argued here that both the money stock and the monetary base are determined endogenously by the optimizing behavior of commercial banks and private agents like households and firms. An industrial organization style model for the money creating sector that describes the money creation process is developed assuming that the main policy variable of the central bank is the money market interest rate. A vector error correction model for the nominal money stock, the monetary base, nominal income, short-term and long-term interest rates, and the required reserve rate is specified, and the interaction between these variables is analyzed empirically. The evidence contradicts the money multiplier approach and supports the presented model of the money creating sector. JEL Classification: C32, E51, E52 Keywords: Industrial organization approach to banking theory, money multiplier, endogenous money, vector error correction model ∗ This paper is partially based upon the second chapter of the author’s doctoral dissertation (Vector au- toregressive analysis and monetary policy, Aachen: Shaker, 2002). This version will be published...
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...The Multiplier with imports We assume that countries are spending fixed % of their GDP on buying goods in other countries, e.g. on imports. Example. Suppose C = 200 + 0.5DI T = 100 Tr = 0 G = 100 I = 200 IM = 0.2Y X =300 Here IM = 0.2Y, which implies that 20% of GDP are spent on imports. Remember that DI = Y – T + Tr = Y – 100. Equilibrium on the demand side Y* solves the following equation Y = C + I + G + X – IM = 200 + 0.5(Y - 100) + 200 + 100 + 300 – 0.2Y Rearranging, we find Y* = (200 – 50 + 200 + 100 + 300) / (1 – (0.5 - 0.2)) = 1071 In general, Marginal Propensity to Import (MPI) is % of extra $1 of income that is spent on imports, e.g. suppose MPC = 0.9 and MPI = 0.1. This implies that C = 0.9DI + some constant and IM = 0.1Y. Out of each new dollar of income, $0.90 is spent, but of that $0.90, $0.10 is spent on foreign goods. So, Marginal Propensity to Consume Domestic Products MPC domestic = MPC - MPI = 0.90 - 0.10 = 0.8 only $ .80 of an extra $1 in income is spent on domestic goods. MPC domestic is the number we need to accurately calculate the multiplier Multiplier with imports = 1 / (1 – MPC domestic) = 1 / (1 - (MPC – MPI)) in our example, with MPI = .1: Multiplier with imports = 1 / ( 1- ( .9 - .1)) = 1 / (1- .8) = 1 / 0.2 = 5 Example from hw3 Suppose there are only two countries: the US and Mexico. Consider the following data: MPCMX = 0.4 (MPC in Mexico) MPIMX = 0.03 (so 3% of an additional $1 of income in Mexico is spent on the American goods) 1 MPCUS = 0...
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...Lab 2 Switches versus Hubs Overview Ethernet hubs work at the physical layer, simply repeating any frames they receive on one port onto all other ports. For this reason, they are also called multiport repeaters. Switches, on the other hand, forward frames only to the port that is connected to the frame’s destination. All the nodes connected to a hub are considered to be part of the same broadcast domain. In other words, any frame transmitted by one of the nodes will be received by all the rest. This configuration can limit throughput, as all nodes must share the capacity of the LAN. Since switches forward frames only on a single line, they create multiple broadcast domains, leading to great gains in throughput. The throughput of a switch is restricted, however, by its processing speed, the speed at which it can forward frames onto the correct outgoing link. Objective To examine the change in throughput in a local area network when upgrading from a hub to a switch. Build the Simulation Model Start up OPNET IT Guru Academic Edition. Select the File tab => New... Choose Project and click on OK. Change the Project Name to xx_Switch_vs_Hub (where xx are your initials). Set the Scenario Name to Hub and click on OK. In the Initial Topology window, select Create Empty Scenario and click on Next. In the Choose Network Scale window, select Office and click on Next. In the Specify Size window, accept the default values and click on Next. In the Select Technologies window, include the...
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...TD EQUIPMENT AND RENTALS COMMUNICATIONS TABLE OF CONTENTS The company that I represent is called TD Equipment and Rentals. We specialize in heavy equipment operating and will do almost any job that you can ask for. We also rent equipment to countries around the world for major construction projects. The majority of our jobs involve underground drainage, but our knowledge of the construction field does not end with just that. We have worked on hundreds of billion dollar projects all around the world. The following is a brief introduction and five methods of good organizational communication assets that should be implied at the workplace to ensure max productivity and a safe environment. Customer Service To ensure that customers will return to your place of business because of the supreme service that they have received previously. One of the biggest parts of owning a business is having the clientele to operate efficiently. A good way to promote business is to practice great customer service. Implementing proper customer service will allow customers to feel special, and will make them want to choose your business over others.This good customer service will lessen the amount of communication mistakes that are made between workers of the company and it’s customers. When customers are treated with kindness and respect, they are less likely to resist which may cause mistakes. Customers do not want angry, mad workers on their properties working on their land, but rather...
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...The idea of suicide contagion is similar to the social multiplier theory; however, instead of it effecting only a few individuals, it can having a tidal wave effect and cause a significant rise in suicides (Becker et al., 2004). Newspaper and television reporting have caused the risk of the suicide contagion effect to increase dramatically. Stack (2003) “showed that studies measuring the effect of a suicide story involving an entertainment or political celebrity were 14.3 times more likely to find a copycat effect. (pp.111-112)” Research suggests that the inadvertent romanticizing of suicide may be encouraging others to identify with the victim and in turn commit the act themselves (Becker et al., 2004). The World Wide Web has also been shown...
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...Using the concept of the multiplier effect, evaluate the likely economic effects on the UK price level and the equilibrium levels of real output and rising interest rates? The multiplier effect can be defined as an increase in a country’s supply of money from the banks’ ability to lend. An injection into the circular flow of income will most likely cause further rounds of re spending into the economy. The size of the multiplier effect depends on an assortment of facts from interest rates to the marginal propensity to consume. If the MPC consumers are more likely to re spend the money and put it back into the circular flow. This also includes investments by firms and spending on abroad imports. If interest rates are high consumers and firms are more likely to save their money as the return is very high, but if interest rates lower the opportunity cost of saving the money also lowers and firms/ consumers will inclined to spend in the economy. Increased interest rates will potentially have several consequences, one of these being increased borrowing rates. If borrowing rates go up firms become less willing to take out money from the banks and invest, as the cost is too high. As investment from firms decrease there will be an inevitable decrease in capital good investment which will cause a leftward shift in aggregate demand. Subsequently the decrease in AD may also result in a lowering of inflation. Price level Price level Increased interest would directly reduce inflation...
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...Investment Multiplier: Keynes’ income multiplier tells us that a given increase in investment ultimately creates total income which is many times the initial increases in income resulting from that investment. That is why it is called income multiplier or investment multiplier. Income multiplier indicates how many times the total income increases by a given initial investment. Suppose Rs. 100 million are invested in public works and as a result there is an increase of Rs. 300 million in income. In this case, income has been increased 3 times, i.e., the multiplier is 3. If ΔI represents increase in investment, ΔY indicates increase in income and K is the multiplier, then the equation of multiplier is as follows: The multiplier is the numerical co-efficient showing how large an increase in income will result from each increase in investment. The multiplier is the number by which the change in investment must be multiplied in order to get the resulting change in income. It is the ratio of change in income to the change in investment. If an investment of Rs. 50 million increases income by Rs. 150 million, the income multiplier is 3 and if Rs. 200 million, the multiplier is 4 and so on. In the following multiplier equation, the relationship between income and investment is determined through marginal propensity to consume: Where: (mps: Marginal Propensity to Save) Therefore, the third multiplier equation is: It should be noted that the size of multiplier varies directly...
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...VHDL IMPLEMENTATION OF FLOATING POINT MULTIPLIER USING VEDIC MATHEMATICS I.V.VAIBHAV1, K.V.SAICHARAN1, B.SRAVANTHI1, D.SRINIVASULU2 1 Students of Department of ECE,SACET, Chirala, AP, India Associate Professor of the Dept ECE, SACET, Chirala, AP, India 3 Electronics and Comunication Department, St.Ann‟s college of engineering & Technology, Chirala, india. E-mail:innamurivaibhav1@gmail.com, kota.saicharan@gmail.com, sravanthi.408b@gmail.com, seenu_dasari@rediffmail.com 2 Abstract: This project presents a binary floating point multiplier based on Vedic algorithm. To improve power efficiency a new algorithm called URDHVA-TRIYAKBHYAM has been implemented for 24 X 24 bit multiplier design. By using this approach number of components can be decreased and complexity of hardware circuit can be decrease. In this project, Vedic multiplication technique is used to implement IEEE 754 floating point multiplier. The Urdhava-Triyakbhym sutra is used for the multiplication of Mantissa i.e., 24x24 bits. The sign bit of the result is calculated using one XOR gate and a Carry Save Adder is used for adding the two biased Exponents. The underflow and overflow cases are handled. The inputs to the multiplier are provided in IEEE 754, 32 bit format. The multiplier is implemented in VHDL and Spartan3E FPGA is used. The result consists of 32 bit binary number of which MSB represent sign, next 8 bit represents Exponent and remaining 23 bits represents Mantissa. Keywords: Vedic Mathematics...
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...Economic impacts of Tourism Page # 1 Economic Impacts of Tourism Daniel J. Stynes Businesses and public organizations are increasingly interested in the economic impacts of tourism at national, state, and local levels. One regularly hears claims that tourism supports X jobs in an area or that a festival or special event generated Y million dollars in sales or income in a community. “Multiplier effects” are often cited to capture secondary effects of tourism spending and show the wide range of sectors in a community that may benefit from tourism. Tourism’s economic benefits are touted by the industry for a variety of reasons. Claims of tourism’s economic significance give the industry greater respect among the business community, public officials, and the public in general. This often translates into decisions or public policies that are favorable to tourism. Community support is important for tourism, as it is an activity that affects the entire community. Tourism businesses depend extensively on each other as well as on other businesses, government and residents of the local community. Economic benefits and costs of tourism reach virtually everyone in the region in one way or another. Economic impact analyses provide tangible estimates of these economic interdependencies and a better understanding of the role and importance of tourism in a region’s economy. Tourism activity also involves economic costs, including the direct costs incurred by tourism businesses...
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...1. A multiplier is a factor of proportionality that measures how much an endogenous variable changes in response to a change in some exogenous variable. For example, a change in spending such as an investment, changes output and income by more than the initial change in investment spending. This is the result of a multiplier effect. Suppose a large corporation decides to invest in a new production plant in a small town. In the first year, $2 million was spent on wages for workers and various other people involved in setting up the new plant. If MPC is 0.5, those people would spend $1 million on goods and services. The businesses and individuals receiving the $1 million would in turn spend $500,000 and so on. If the marginal propensity to consume is equal to 0.5, then the multiplier can be calculated as: Multiplier = 1 / (1 – MPC) = 1 / (1 – 0.5) = 1 / 0.5 = 2 An increase in MCP will result in a higher multiplier effect Marginal propensity to consume + Marginal propensity to save = 1 MPS = 1 – MPC Multiplier = 1 / MPS An increase in MPS will result in a lower multiplier effect. When MPS = 0.4 Multiplier = 1 / 0.4 = 2.5 When MPS = 0.6 Multiplier = 1 / 0.6 = 1.67 When MPS = 1 Multiplier = 1 / 1 = 1 When MPC = 1 Multiplier = 1 / (1 – 1) = ∞ When MPC = 0.67 Multiplier = 1 / (1 – 0.67) = 3.03 When MPC = 0.5 Multiplier = 1 / (1 – 0.5) = 2 Increase in investment by $8 billion When MPC = 0.8 Multiplier = 1 / (1 – 0.8) = 5 Multiplier = Change in real...
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...political will to break up unions. 3. Five factors that shift the AD curve are: changes in foreign income, changes in expectations, changes in exchange rates, changes in the distribution of income, and changes in government aggregate demand policy. 4. Say there is a rise in the price level. That would make the holders of money poorer (the wealth effect). It would also reduce the real money supply, increasing the interest rate (the interest rate effect). Assuming fixed exchange rates, it would also make goods less internationally competitive (the international effect). All three account for the quantity of aggregate demand decreasing—decreasing spending as the price level rises. These initial increases are then multiplied by the multiplier effect as the initial spending reverberates through the economy. 5. Two factors that shift the SAS curve are changes in productivity and changes in input prices. 6. If the economy is in short-run equilibrium below potential output, input prices will fall, causing the short-run aggregate supply curve to shift down and the price level to fall. This will set the wealth, interest rate, and international effects in motion, increasing the quantity of aggregate demand and thereby bringing the...
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...seems quite low because of the multiplier of 5.5 times given in Exhibit 13. But obviously, the given multiplier should be inappropriate and exorbitant due to the overall overvaluation of limited listed companies in China’s banking sector. The China’s stock market full of unsophisticated retail investors was highly immature and speculative, compared to the mature markets in developed countries. Supply of tradable shares fell short of demand, leading to higher market capitalization of public companies. Based on these concerns, we could not use the multiplier of 5.5 times to calculate the final consideration of this deal. In such a case, we should refer to other price-to-book multiples of similar deals over that period. According to the data given in the case (as shown in Figure 1), these China banks had also received foreign investment and their deals had multipliers of 1.2-1.5 times. Given their similarity, the multiplier of 1.6 times is appropriate for the SDB deal. Figure 1 Date | Foreign Investor | China Bank | % Stake invested | Purchase P/B | Sep-99 | International Finance Corporation | Bank of Shanghai | 5% | 1.5x | Nov-01 | International Finance Corporation | Nanjing City Commercial Bank | 15% | 1.2x | Dec-01 | HSBC | Bank of Shanghai | 8% | 1.2x | Dec-02 | Citibank | Pudong Development Bank | 5% | 1.4-1.5x | However, we can see from Exhibit 13 that CMB, Mingsheng and SPDB, the similar players in the market, held multiplier of 2.3, 2.2 and 4.9 times respectively...
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...Essay Week 4 List and describe the four force multipliers. How do terrorists us force multipliers? Give examples for each force multipliers. There are four force multipliers in terrorism that author J. White speaks about in his book regarding terrorism. These multipliers are technology, media. transnational support, religion; they are a methods used so that manpower will not be increased, but to increase striking force. These force multipliers can work individually or hand in hand with one another. If I had to choose, I would pick technology as my first force multiplier fight against because before you have start to plan, conduct, or execute you need technology for communication. According to White (2013), technology is the force multiplier that allows small groups to launch attacks”. Also, with technology comes how a group is financed (where are they getting their money) and investment resources. I believe that technology is used mostly to attempt to outwit and evade law enforcement and government authority The media plays a powerful role with terrorist groups. The media force multiplier is basically any type of media coverage of terrorism. Believe it or not, although terrorist are in remote locations, they have access to all types of media via the television and/or the internet. According to White (2013), “all forms of media can be used to multiply force, and the internet is one of the most important force multipliers easily available to terrorists”. There are many...
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...Three specific examples are presented. These represent a range of alternatives for estimating the economic impacts of visitor spending. The techniques covered range from methods based largely on judgement, to methods that utilize secondary spending data and published multipliers, to the use of visitor surveys and input-output models. A third bulletin in this series discusses survey methods for measuring visitor spending and includes sample spending instruments. While the construction and operation of tourist facilities also has economic impacts, we will restrict our attention here to the impacts of visitor spending. Review of Basic Approach and Levels of Analysis The economic impact of visitor spending is typically estimated by some variation of the following simple equation: Economic Impact of Tourist Spending = Number of Tourists * Average Spending per Visitor * Multiplier This equation suggests three distinct steps and corresponding measurements or models: (1) Estimate the change in the number and types of tourists to the region (2) Estimate average levels of spending (often within specific market segments) of tourists in the local area. (3) Apply the change in spending to a regional economic model or set of multipliers to determine the secondary effects. The three steps and corresponding information typically involve distinct methods, models and information sources....
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