The Timing of Changes in G and T in the Balanced‐budget Multiplier

The analysis of the standard balanced‐budget multiplier is based on the suppositions that the general price level and interest rates are fixed and that the equal changes in government expenditures and taxes are autonomous. However, no explicit assumption is made about the timing of the dynamic adjustments. This article does just this. It concentrates on the time periods within which government revenues and expenditures vary either simultaneously or iteratively. It stresses the importance of the timing “menu” for the makers of fiscal policy in their pursuit of manipulating the changes in the national product and in the level of employment.