Wednesday, February 20, 2013

Calculation of GDP is Bogus

Econ Girl, Jodi Beggs, has a nice post about the spending multiplier on her site.  We teach that someones spending is someone else's income.  The income stream takes the form of the sum of an infinite series where the MPC is less than 1.  So the change in income from the spending of a dollar is S= 1 + MPC^1 + MPC ^2 + MPC^3 ....The cartoon on Jodi's page makes light of this sequence.

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