What you’ll learn to do: understand the Keynesian view on changes in government spending and taxation

Here are some of the specific things you’ll learn to do in this section:

• Describe the multiplier effect
• Define the crowding out effect and explain why it occurs and how it reduces the fiscal multiplier.
• Define the Keynesian concept of the Liquidity Trap and explain why it occurs and how it reduces the effectiveness of monetary policy.

LEARNING ACTIVITIES

The learning activities for this section include:

• Reading: Keynesian View on Changes in Government Spending and Taxation
• Reading: Liquidity Trap
• Self Check: Liquidity Trap
• Reading: The Expenditure Multiplier
• Self Check: The Expenditure Multiplier
• Reading: Crowding Out
• Self Check: Crowding Out

Take time to review and reflect on each of these activities in order to improve your performance on the assessment for this section.