The Multiplier

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Created by
Ricky £

Cards (6)

  • What is the multiplier?:
    • The multiplier is the process by which any change in a component in aggregate demand results in a greater final change in real GDP
  • the bigger the mpc the bigger the multiplier
  • the smaller the marginal propensity to save (MPS) the bigger the multiplier
  • the smaller the mpc the smaller the multiplier
  • the larger the MPS the smaller the multiplier
  • Formula for the increase in GDP:
    Injection x multiplier =increase in GDP