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Page 80
one-third is saved and two-thirds spent, then the extra $ 100 of government expenditures will ultimately, on this analysis, add $ 300 to income. This is the simple Keynesian multiplier analysis with a multiplier of three. Of course, if there is one injection, the effects will die off, the initial jump in income of $ 100 being succeeded by a gradual decline back to the earlier level. But if government expenditures are kept $ 100 higher per unit of time, say $ 100 a year higher, then, on this analysis, income will remain higher by $ 300 a year.
This simple analysis is extremely appealing. But the appeal is spurious and arises from neglecting other relevant effects of the change in question. When these are taken into account, the final result is much more dubious: it may be anything from no change in income at all, in which case private expenditures will go down by the $ 100 by which government expenditures go up, to the full increase specified. And even if money income increases, prices may rise, so real income will increase less or not at all. Let us examine some of the possible slips' twixt cup and lip.
In the first place, nothing is said in the simple account about what the government spends the $ 100 on. Suppose, for example, it spends it on something that individuals were otherwise obtaining for themselves. They were, for example, spending $ 100 on paying fees to a park which paid the cost of attendants to keep it clean. Suppose the government now pays these costs and permits people to enter the park "free." The attendants still receive the same income, but the people who paid the fees have $ 100 available. The government spending does not, even in the initial stage, add $ 100 to anyone's income. What it does is to leave some people with $ 100 available to use for purposes other than the park, and presumably purposes they value less highly. They can be expected to spend less out of their total income for consumer goods than formerly, since they are receiving the park services free. How much less, it is not easy to say. Even if we accept, as in the simple analysis, that people save one-third of additional income, it does not follow that when they get one set of consumer goods "free," two-thirds of the released money will be spent on other consumer goods. One extreme possibility, of course, is that they

 
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