Abstract
The balanced budget multiplier theorem is concerned with changes in aggregate demand consequent on simultaneous and equal changes in government expenditure and taxation. The essence of the theorem is that the expansionary effect of the former exceeds the contractionary effects of the latter. Thus the net effect is positive rather than zero which the commonsense of pre-Keynesian economics suggested. In other words, a tax-financed increase in public expenditure would be expansionary rather than neutral.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Bibliography
Gelting, J. 1941. Nogle Bemaerkninger om Finansieringen af offentlig Virksomhed. Nationalökonomisk Tidsskrift 79(5): 293–299.
Haavelmo, T. 1945. Multiplier effects of a balanced budget. Econometrica 13(October): 311–318.
Peston, M.H., and W.J. Baumol. 1955. More on the multiplier effects of a balanced budget. American Economic Review 45(March): 140–148.
Turvey, R. 1953. Some notes on multiplier theory. American Economic Review 43: 275–295.
Wallich, H.C. 1944. Income-generating effects of a balanced budget. Quarterly Journal of Economics 59(November): 78–91.
Author information
Authors and Affiliations
Editor information
Copyright information
© 2018 Macmillan Publishers Ltd.
About this entry
Cite this entry
Peston, M.H. (2018). Balanced Budget Multiplier. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_412
Download citation
DOI: https://doi.org/10.1057/978-1-349-95189-5_412
Published:
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-95188-8
Online ISBN: 978-1-349-95189-5
eBook Packages: Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences