Multiplier
The multiplier is the ratio of total change in national income to the initial change in autonomous spending. A multiplier of 2 means £1 additional spending generates £2 total income increase. The multiplier reflects spending cycles through the economy.
Real World
The London 2012 Olympics initial £9.3 billion government spend generated an estimated £17 billion in economic activity for the UK economy through successive rounds of spending by construction workers, hospitality staff, and suppliers.
Exam Focus
State the multiplier formula (1/(1−MPC)) and note that withdrawals (savings, taxes, imports) reduce its size — examiners expect both formula and limitation.
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