The multiplier effect

Question 1

Define the multiplier ratio

Answer 1

How much GDP will increase in total following an initial injection into the economy

Question 1

Define the multiplier effect

Answer 1

An initial increase in injections leads to a larger increase in aggregate demand

Question 2

Mutliplier formula

Answer 2

1/1-MPC 1/MPW 1/MPM+MPT+MPS