6- The multiplier definitions Flashcards

1
Q

Multiplier

A

An increase in an injection will lead to an even greater increase of national income.
= 1/(1-MPW)
= 1/MPC

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2
Q

Marginal propensity to consume (MPC)

A

The proportion of an increase in income spent on consumption.

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3
Q

Marginal propensity to import (MPI)

A

The proportion of an increase in income spent on imports.

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4
Q

Marginal propensity to save (MPS)

A

The proportion of an increase in income that is saved.

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5
Q

Marginal propensity to tax (MPT)

A

The proportion of an increase in income that is taken away in tax.

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6
Q

Marginal propensity to withdraw (MPW)

A

The proportion of an increase in income that is withdrawn from the circular flow.

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