Multiplier Flashcards
1
Q
Define
A
An initial injection into circular flow causes a bigger final increase in national income
2
Q
General formula
A
Final change in real gdp/ initial change in AD
3
Q
Main formula
A
1/(1-MPC) or 1/MPW or 1/(MPS + MPT + MPM)
4
Q
Negative multiplier effect
A
When initial withdrawal or leakage from the circular flow leads to bigger final drop in real GDP
