Multiplier Flashcards
1
Q
Discuss the multiplier
A
The multiplier relates to how much national income changes as result of injection or withdraw
2
Q
What is the multiplier or K
A
A number by which change in initial spending or withdrawal must be multiplied to determine resulting change in income of economy
3
Q
What is the multiplier effect
A
Change in spending causes change in demand of income
4
Q
What is MPC
A
Marginal propensity to consume
Proportion of disposable income which household spend
5
Q
What is MPS
A
Marginal propensity to save
Proportion of additional income which households save
6
Q
Calculate the multiplier (K)
A
1 / 1 - MPC
1 / MPS
