The Multiplier

Question 1

What is the multiplier

Answer 1

Initial government injection causes a multiply through the economy

E.g increasing NHS salaries leads to higher spending by these workers increasing AD

Question 2

Causes of multiplier effects

Answer 2

Injection of capital e.g Govt spending or investment

Change in income and spending

Question 3

Factors affecting the size of a multiplier

Answer 3

Marginal propensity to consume
Spare capacity

Question 4

The accelerator

Answer 4

Relationship between investment levels and rate of change in gdp

Question 5

Multiplier formula

Answer 5

1/1-mpc = 1/MPW

Question 6

Multiplier effect

Answer 6

Initial injection promoting a bigger final increase in income

Injecting money to nhs workers - higher spending- higher AD

Question 7

Marginal propensity formulas

Answer 7

Change in propensity (save,tax,import)/ change in income