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
2
Q
Marginal propensity to consume (MPC)
A
The proportion of an increase in income spent on consumption.
3
Q
Marginal propensity to import (MPI)
A
The proportion of an increase in income spent on imports.
4
Q
Marginal propensity to save (MPS)
A
The proportion of an increase in income that is saved.
5
Q
Marginal propensity to tax (MPT)
A
The proportion of an increase in income that is taken away in tax.
6
Q
Marginal propensity to withdraw (MPW)
A
The proportion of an increase in income that is withdrawn from the circular flow.