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AVERAGE PROPENSITY TO SAVE).

Balanced budget multiplier. The multiplier effect on national income of an increase in government expenditure exactly matched by an increase in taxation, so that the balance of the government’s budget remains unchanged. It might be thought that an increase in government expenditure of, say, £100m., if matched by an increase in taxation of £100m., would have no net effect on aggregate demand in the economy map and that national income would remain unchanged. This is not in general the case, however: there will usually be an expansionary effect. At its simplest, the reason for this is that only part of the increase in taxation results in lower aggregate demand, while all the increased expenditure results in increased aggregate demand so that there is a net injection of demand into the economy map, which then has a multiplier effect. Thus suppose income earners save 20 per cent of their disposable income and spend the rest. An increase in taxation of £100m. reduces disposable income by the same amount, reduces saving by £20m. and consumer expenditure by £80m. Aggregate demand falls by only £80m., therefore. The £100m. extra expenditure adds directly to aggregate demand, so there is a net addition to aggregate demand of £20m., which will then have a multiplier effect. This is the balanced budget multiplier.

Balanced growth. A particular form of growth process of the economy map in which all the main economic aggregates – national income, consumption, the stock of capital, employment – grow at the same percentage rate over time. Although actual economies rarely if ever achieve such balanced growth paths, the analysis of such paths has played an important role in growth theory analogous to the role played in static economic theory by the concept of long-run static equilibrium (O long-run; static equilibrium).

Balancing allowance. capital allowances.

Bancor. The term j. m. keynes applied to the currency which he proposed a new central international bank should create and put into circulation for the payment of debts between countries (O keynes plan). His proposal was rejected at the 1944 bretton woods Conference, which established the international monetary fund. However, the beginning of 1970 saw the introduction of a similar international currency in the allocation of special drawing rights through the I.M.F.

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