YJ Draiman for Mayor of Los Angeles 2017
When elected, I welcome the chance for serving as The Mayor of Los Angeles and represent the people.
Los Angeles needs an economic boost and long term vision how to revitalize the economy and increase employment, We need to reduce bureaucracy and make government financially responsible and more efficient.
We need to increase business and employment, convert the unemployed from a revenue depleter to a revenue generator.
Promote business and create the multiplier effect.
The multiplier effect
Every time there is an injection of new demand into the circular flow there is likely to be a multiplier effect. This is because an injection of extra income leads to more spending, which creates more income, and so on. The multiplier effect refers to the increase in final income arising from any new injection of spending.
The size of the multiplier depends upon household’s marginal decisions to spend, called the marginal propensity to consume(mpc), or to save, called the marginal propensity to save (mps). It is important to remember that when income is spent, this spending becomes someone else’s income, and so on. Marginal propensities show the proportion of extra income allocated to particular activities, such as investment spending by US firms, saving by households, and spending on imports from abroad. For example, if 80% of all new income in a given period of time is spent on US products, the marginal propensity to consume would be 80/100, which is 0.8.
The following general formula to calculate the multiplier uses marginal propensities, as follows:
Hence, if consumers spend 0.8 and save 0.2 of every $1 of extra income, the multiplier will be:
Hence, the multiplier is 5, which means that every $1 of new income generates $5 of extra income.
The multiplier effect in an open economy
As well as calculating the multiplier in terms of how extra income gets spent, we can also measure the multiplier in terms of how much of the extra income goes in savings, and other withdrawals. A full ‘open’ economy has all sectors, and therefore, three withdrawals – savings, taxation and imports.
This is indicated by the marginal propensity to save (mps) plus the extra income going to the government - the marginal tax rate (mtr) plus the amount going abroad – the marginal propensity to import (mpm).
By adding up all the withdrawals we get the marginal propensity to withdraw (mpw). The multiplier can now be calculated by the following general equation:
When to refer to a ‘multiplier effect’
The multiplier concept can be used any situation where there is a new injection into an economy. Examples of such situations include:
1. When the government funds building of a new motorway
2. When there is an increase in exports abroad
3. When there is a reduction in interest rates or tax rates, or when the exchange rate falls.
The downward or 'reverse' multiplier
A withdrawal of income from the circular flow will lead to a downward multiplier effect. Therefore, whenever there is an increased withdrawal, such as a rise in savings, import spending or taxation, there is a potential downward multiplier effect on the rest of the economy.
Confronting the Challenges of Tomorrow While Cherishing Today
Our world today confronts current economic hardship, which represent both a challenge and an opportunity for us to assert our ability to work together for the good of all. Efforts to combat abuse and waste have fallen short. Many countries around the world suffer from the shortage of resources such as water and energy, which threatens their stability and whose capacity and resources disable them from containing the panic, thus necessitating, in such a situation, assistance for those countries in dealing with the crisis. Our world also confronts numerous environmental challenges such as limited and declining natural resources, climate change, drought and desertification, all of which require the redoubling of worldwide efforts to address them in order to safeguard the right of future generations to a secure life. The scarcity of water and energy threatens the eruption of conflicts in different parts of the world, and the nations of the world are therefore called upon to maximize the benefit from, and the proper management of, available water and energy resources while respecting and protecting the acquired rights of nations to utilize and further develop those resources.
We must work together as a cohesive force to expedite development of natural resources, eliminate the abuse of the environment. Utilize today’s technology to expand the desalinization of water increase and expedite the development of Alternative energy with an environmental balance.
We must learn to appreciate what we have today while protecting and preserving our natural resources for our sake and for future.