Multiplier

Question 1

Define

Answer 1

An initial injection into circular flow causes a bigger final increase in national income

Question 2

General formula

Answer 2

Final change in real gdp/ initial change in AD

Question 3

Main formula

Answer 3

1/(1-MPC) or 1/MPW or 1/(MPS + MPT + MPM)

Question 4

Negative multiplier effect

Answer 4

When initial withdrawal or leakage from the circular flow leads to bigger final drop in real GDP