Ceilings, Floors and Contra-cyclical Policies
This chapter discusses some more variants of the ‘multiplier-accelerator interaction model’ introduced as Model C in Chapter 2. We first describe a cycle theory, due essentially to Hicks, which has the theoretically attractive property of implying regular cycles in income, which neither explode nor die away. We then return to the original model and discuss what would be the effect on income, in an economy obeying the ‘laws’ of the model, of various government policies.
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