f) multiplier for shifts in AD

• When does the multiplier have a big effect on the economy?

  When there is plenty of spare capacity
• What conditions enhance the multiplier effect?

  Low MPW and higher MPC
• What happens to output when there is little spare capacity in the economy?

  Rising demand creates rising prices
• What is the relationship between spare capacity and the multiplier effect?

  More spare capacity leads to a bigger multiplier effect
• How does the presence of spare capacity influence economic output?

  It allows for increased output without raising prices