Short- and Long-Term Forecasts and Multipliers

  • Explanation

    FORECASTS
    SHORT-RUN LONG-RUN
    EXOGENOUS SECTORS: NEED TO FORECAST INDEPENDENTLY
    1. Private Exports
    2. Exports to Federal Government
    3. Local Business Investment
    4. Local Housing Investment
    5. Local Government Investment
    6. Local Government Current Operations
    Export Sector AND Structural Changes
    MULTIPLIER
    Total Income Increase = Increase in (Above) Exogenous Sectors x 1

    1-(pcl x income created per dollar of local consumption sales)
    Total
    Income_=
    Increase
    Increase in Private Exports___x
    and Exports to Federal Government
    1


    1 - [(propensity to consume locally x income created per dollar of local consumption sales {iclcs}) + (propensity to invest in local business x iclbis) + (propensity to invest in local housing x iclhis) + (propensity to invest in local government x icgis) + (propensity to spend on current government operations x iclgcos)]

    Source: Tiebout, Community Economic Base Study, Chs. 6+7

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