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    Reasons the Multiplier Model is Misleading

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    List six reasons why the multiplier model might be misleading.

    © BrainMass Inc. brainmass.com December 24, 2021, 5:52 pm ad1c9bdddf
    https://brainmass.com/economics/aggregate-demand-and-supply/reasons-multiplier-model-misleading-76335

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    The multiplier model does not determine income from scratch.

    At best, it can estimate the directions and rough sizes of autonomous demand or supply shifts.

    The aggregate expenditure shifts that occur in response to a shift in autonomous expenditures may be overemphasized.

    The multiplier model assumes that the price level is fixed but it can change in response to changes in aggregate demand.

    Further, people's forward looking expectations make the adjustment process much more complicated. Most people, however, act upon their expectations of the future.

    source: http://classwork.busadm.mu.edu/Davis/44/22

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 5:52 pm ad1c9bdddf>
    https://brainmass.com/economics/aggregate-demand-and-supply/reasons-multiplier-model-misleading-76335

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