Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92593
Authors: 
Murota, Ryu-ichiro
Ono, Yoshiyasu
Year of Publication: 
2010
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 779
Abstract: 
We propose a microeconomic foundation of the multiplier effect and that of the consumption function using a dynamic optimization model that explains a shortage of aggregate demand and unemployment. We show that government purchases boost aggregate demand through a multiplier-like process but that the implication is quite different. It works through not an increase in disposable income but moderation of deflation, which makes money holding costly and stimulates consumption.
Subjects: 
Keynesian consumption function
multiplier effect
Keynesian Cross
persistent unemployment
aggregate demand
JEL: 
E12
E24
E62
Document Type: 
Working Paper

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