balanced budget multiplier

(1940s)

Attributed to J Gelting in 1941 and Norwegian economist Trygve Haavelmo (1911-1999) in 1945, balanced budget multiplier is the effect on national income of equal changes in government expenditure and revenues.

The multiplier effect on income of an increase in government expenditure exactly matched by an increase in taxation will lead to a situation where the balance of the government's budget will remain unchanged.

The balanced budget multiplier is important in understanding government management of the economy.

Also see: multiplier, multiplier-accelerator, equilibrium theory, partial equilibrium theory

Source:
T Haavelmo, 'Multiplier Effects of a Balanced Budget', Econometria, vol. XIII (October 1945), 311-18

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