Krugman's Cost Benefit Analysis for Austerity Cuts in Government Spending

spending change as % of GDP

-1

multiplier rate

1.4

marginal tax rate

0.25

real interest rate

0.03

	Spending Reduction
	Revenue Reduction
	True Savings
	Real Interest Payment Reduction
	GDP Reduction required to nullify fiscal savings

This Demonstration is based upon Paul Krugman's New York Times, July 7, 2010 blog entitled "Self-Defeating Austerity" and is concerned with the effects upon revenue, savings, interest payments, and changes in gross domestic product (GDP) as a result of undertaking cuts or increases in government spending.