multiplier effect
- Created by: ishah
- Created on: 11-05-13 12:02
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- multiplier effect
- Gov spending ^ -> consumption ^ -> national income ^
- chnage AD - change aggregate output
- GDP grows
- chnage AD - change aggregate output
- size of multiplier
- depends on withdrawals
- MPC
- multiplier =1/MPC
- change in consumption resulting from disposable income ^
- amount spent divided by new income
- change in consumption resulting from disposable income ^
- multiplier =1/MPC
- AD increases + AS elastic
- national income ^ greater than AD ^
- doesn't go on forev's
- income ^ - higher tax
- AS becomes more inelastic - prices ^ not output
- MPS
- consumption and income
- MPC x real income + autonomous consumption
- Gov spending ^ -> consumption ^ -> national income ^
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