This paper analyzes the government expenditure multiplier in New Keynesian models, showing how it depends on the flexibility of prices and wages, monetary policy, and the zero lower bound on interest rates. In models with fully flexible prices and wages, the multiplier is less than 1 due to crowding out of private expenditure. However, if monetary policy maintains a constant real interest rate, the multiplier equals 1. When monetary policy responds to inflation or real activity by raising real interest rates, the multiplier can be smaller. At the zero lower bound, where nominal interest rates cannot be reduced further, fiscal stimulus can have a larger multiplier because the real interest rate falls, and government purchases can help fill the output gap. The paper also discusses the welfare effects of government purchases and the role of tax distortions. It concludes that New Keynesian models can produce multipliers higher than the neoclassical model, making them more consistent with empirical evidence. The analysis shows that the multiplier depends on the degree of price and wage stickiness, the response of monetary policy, and the presence of a zero lower bound. The results highlight the importance of considering these factors when evaluating the effectiveness of fiscal policy.This paper analyzes the government expenditure multiplier in New Keynesian models, showing how it depends on the flexibility of prices and wages, monetary policy, and the zero lower bound on interest rates. In models with fully flexible prices and wages, the multiplier is less than 1 due to crowding out of private expenditure. However, if monetary policy maintains a constant real interest rate, the multiplier equals 1. When monetary policy responds to inflation or real activity by raising real interest rates, the multiplier can be smaller. At the zero lower bound, where nominal interest rates cannot be reduced further, fiscal stimulus can have a larger multiplier because the real interest rate falls, and government purchases can help fill the output gap. The paper also discusses the welfare effects of government purchases and the role of tax distortions. It concludes that New Keynesian models can produce multipliers higher than the neoclassical model, making them more consistent with empirical evidence. The analysis shows that the multiplier depends on the degree of price and wage stickiness, the response of monetary policy, and the presence of a zero lower bound. The results highlight the importance of considering these factors when evaluating the effectiveness of fiscal policy.