2.4.4 - The Multiplier

• The multiplier process is the idea that an increase in AD because of an increased injection
• A negative multiplier effect can also occur i.e. a withdrawal from the economy could lead to an even further fall in income, decreasing economic growth and possibly leading to a decline in the economy. This means that government plans to cut deficits will lead to an even further decrease of the economy.
• formular for the multiplier

  
• Marginal propensity to consume is how much consumers will spend if given an additional £.