The Multiplier Flashcards
1
Q
Multiplier Formula
A
1/(1-MPC)
2
Q
What is the multiplier effect
A
When an injection into the circular flow leads to a greater proportional increase in AD
3
Q
How to calculate the total growth in GDP (with respect to the multipler)
A
Multiplier x Injection = total growth in GDP
4
Q
What are the 3 injections into the Circular flow
A
Investment, government spending and exports
5
Q
what are the 3 withdraws from the circular flow
A
Taxation, savings and imports
6
Q
What is MPC
A
The marginal propensity to consume refers to the proportion of an additional £ earned that is spent on consumption.
