What does Art Buchwald mean in the "Squaring the Economic Circle"?
I know it has to do with the multiplier effect.
- simplicitusLv 71 decade agoFavorite Answer
The logic is similar:
but the important points are quite different. The term "multiplier" effect is usually used in a macro-economic perspective arguing the benefits of government spending.
1. Emphasizing that it works both ways - there is a multiplier effect when people stop spending too. And this can be far nastier because it is based on fear rather than on simple numbers.
Thus, in a recession, even people who have not lost their jobs and still have the same income tend to spend less, which reduces demand, which causes still more people to be laid off, etc.
2. Pointing out the feedback loop nature of the connections in the economy. The multiplier is not just an arbitrary number the result of a large number of people each reacting to what is going on around them, including the reactions to their own prior actions.
3. Making clear we are talking about people, not abstract systems.
4. Perception is critical in economics:
- carpenteLv 43 years ago
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- 1 decade ago
2 days ago... 2 days until the test... You've gotta be in my class. XD