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apteacher

Conventional Wisdom

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Given this data, if we use the above model, then it becomes clear that the effect of the increase in Government spending (the exogenous component according to the model) has been to slow the decline in GDP. On the other hand, if government spending had remained the same or declined, then we would expect GDP to have fallen at the same or a greater rate.

 

So those are the basics of how that particular model works.

 

 

Your illustration of the basics of how that model works is as transparent as Bernie Madoff's explaination of how his Split-strike option strategy could guarantee returns of 12% a year for 20 years.

 

You seem to be confusing gibberish (exogenous component) with a cogent explaination of your position.

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An exogenous change is a change that comes from outside the model and cannot be explained by the model. This model considers Government Spending (G) to be an exogenous variable.

An endogenous change is a change that comes from inside the model and can be predicted by the model.

 

GDP: Gross Domestic Product

C: Personal Consumption Expenditures

G: Government Expenditures

I: Gross Private Domestic Investment

N: Net Exports

 

The model as I posted it earlier is:

 

GDP = C + G + I + N

 

We can rearrange the equation using the commutative and associative properties of addition:

 

GDP = (C + I + N) + G

 

Now, if the change in (C + I + N) is positive and the change in G is positive, then the change in GDP is positive.

If the change in (C + I + N) is negative and the change in G is negative, then the change in GDP is negative.

If there is no change in (C + I + N), then a positive change in G will result in a positive change for GDP and a negative change in G will result in a negative change in GDP.

If (C + I + N) is positive and the change in G is negative or vice versa, then the change in GDP will depend on which change has the greater magnitude.

 

I hope that clears up any misunderstandings. If it does not, I suggest consulting an introductory Economics textbook on the Simple Keynsian Model or Keynsian Cross.

 

I provided data previously to help anyone interested get a feel for how the components have been changing recently.

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An exogenous change is a change that comes from outside the model and cannot be explained by the model. This model considers Government Spending (G) to be an exogenous variable.

An endogenous change is a change that comes from inside the model and can be predicted by the model.

 

GDP: Gross Domestic Product

C: Personal Consumption Expenditures

G: Government Expenditures

I: Gross Private Domestic Investment

N: Net Exports

 

The model as I posted it earlier is:

 

GDP = C + G + I + N

 

We can rearrange the equation using the commutative and associative properties of addition:

 

GDP = (C + I + N) + G

 

Now, if the change in (C + I + N) is positive and the change in G is positive, then the change in GDP is positive.

If the change in (C + I + N) is negative and the change in G is negative, then the change in GDP is negative.

If there is no change in (C + I + N), then a positive change in G will result in a positive change for GDP and a negative change in G will result in a negative change in GDP.

If (C + I + N) is positive and the change in G is negative or vice versa, then the change in GDP will depend on which change has the greater magnitude.

 

I hope that clears up any misunderstandings. If it does not, I suggest consulting an introductory Economics textbook on the Simple Keynsian Model or Keynsian Cross.

 

I provided data previously to help anyone interested get a feel for how the components have been changing recently.

 

 

Does your formula calculate what is the best time to buy stocks?

 

If not what good is it?

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I hope that clears up any misunderstandings. If it does not, I suggest consulting an introductory Economics textbook on the Simple Keynsian Model or Keynsian Cross.

 

 

I've had my fill of Keynesianism, thank you very much. We can thank Keynes for huge budget deficits, a massive national debt, periodic bouts of inflation, and justification for the welfare state.

 

I'm sorry, but I don't see Keynesianism as the solution to our troubles.

 

 

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One of the major flaws within the Keynesian viewpoint is the assumption that "G" is an "exogenous variable" as you so eloquently put it.

 

If G is funded through taxes, a quick study of the supply and demand model will show you that the addition of "G" detracts from "C+I+N", thus it cannot be arbitrarily added to a GDP formula, and be expected to increase the value of GDP.

 

This terrible assumption has led to all the chaos mentioned in apteacher's post.

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