The Multiplier Flashcards
1
Q
Multiplier
A
Measures how much Real GDP will change if there is an increase or decrease in any of the injections (Exports, Gov. Spending, Investment)
2
Q
Multiplier Formula
A
1 / 1 - MPC (Marginal propensity to Consume)
3
Q
IRL Multiplier
A
IRL the multiplier is different, because there are withdrawals, such as Savings & Taxes
Marginal Propensity to Import (MPM)
Marginal Propensity to Tax (MPT)
Marginal Propensity to Save (MPS)
4
Q
Positive v Negative Multiplier
A
Positive - Increase in the injections leads to increase in Real GDP
Negative - Decrease in an injection leads to a decrease in Real GDP
