<p>In the simple Keynesian model , it's generally assumed that there are no technological changes in the short run. However, as this is a macroeconomic model, changes in one or 2 industries, shouldn't have much of an impact. So how large must the change be for there to be a sizable change in the marginal propensity to spend, and thus, <span class="math-container">$b$</span> in the equation
<span class="math-container">$$Y=I+bY$$</span></p>
<p>where <span class="math-container">$I$</span> is the fixed investment.</p>

CC BY-SA 4.0
2022-09-19T12:29:32.460Z
Hi! Assumptions are something that the modeler makes, so you can always assume that $b$ is fixed, or also that it is endogenous. Which one is better for your model depends on what you are trying to do, what data you have access to, etc.
Giskard
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2022-09-19T12:30:54.387Z
Clearly though it is impossible that both $I$ and $b$ are fixed in the above equation while $Y$ varies freely, unless $I = 0, b=1$.
Giskard
CC BY-SA 4.0
2022-09-19T12:36:51.077Z
@Giskard, I was just wondering when the simple linear model is not good enough of an approximation anymore, that is , how great must the change in technology be for the short run assumption to be rendered void
math and physics forever
CC BY-SA 4.0
2022-09-19T13:43:36.303Z
"*Which one is better for your model depends on what you are trying to do, what data you have access to, etc.*"
Giskard
<macroeconomics><general-equilibrium><keynesian-economics>
A question on short run equilibrium in the simple Keynesian model
math and physics forever
# A question on short run equilibrium in the simple Keynesian model

(Asked by: username_0 on 2022-09-19)

In the simple Keynesian model , it's generally assumed that there are no technological changes in the short run. However, as this is a macroeconomic model, changes in one or 2 industries, shouldn't have much of an impact. So how large must the change be for there to be a sizable change in the marginal propensity to spend, and thus, $b$ in the equation
$$Y=I+bY$$

where $I$ is the fixed investment.

**Tags:** macroeconomics, general-equilibrium, keynesian-economics
> **Comments:**
> **username_1**: Hi! Assumptions are something that the modeler makes, so you can always assume that $b$ is fixed, or also that it is endogenous. Which one is better for your model depends on what you are trying to do, what data you have access to, etc.  
> **username_1**: Clearly though it is impossible that both $I$ and $b$ are fixed in the above equation while $Y$ varies freely, unless $I = 0, b=1$.  
> **username_0**: @Giskard, I was just wondering when the simple linear model is not good enough of an approximation anymore, that is , how great must the change in technology be for the short run assumption to be rendered void  
> **username_1**: "*Which one is better for your model depends on what you are trying to do, what data you have access to, etc.*"  

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## 0 answers

