AD and multiplier Flashcards
1
Q
formula of AD
A
AD = C +I + G + (X-M)
consumption + investment + government spending + balance of current account
2
Q
multiplier formula
A
1/(1-MPC)
or 1/MPW
3
Q
definition of the multiplier effect
A
injection into circular flow of income causes a bigger change in national income
4
Q
what influences investment
A
risk/expectation
interest rates
