6- The multiplier

Question 1

Multiplier definition

Answer 1

The idea that an increase in GDP, because of an increase injection will lead to a further increase in national income.

Question 2

Injections

Answer 2

• Investment
• Exports
• Gov spending

Question 3

Leakages

Answer 3

• Imports
• Taxation
• Savings

Question 4

Multiplier equation

Answer 4

1/MPW

1/(1-MPC)

Question 5

When will the multiplier have an effect?

Answer 5

• When there is spare capacity

- If the economy is at full employment- inflation

Question 6

When will the multiplier have an effect?

Answer 6

In a boom