Multiplier and accelerator

Question 1

What is the multiplier?

Answer 1

The idea that an investment into an economy will lead to a proportionally bigger increase in real GDP

Question 2

How is the multiplier worked out?

Answer 2

1/MPW

Question 3

What does the affect of the multiplier depend on?

Answer 3

elasticity of supply- Neo-classical inelastic curve suggests it doesn’t work but at low capacity Keynesian it works