Investment Multiplier

AAA

DEFINITION of 'Investment Multiplier'

The term investment multiplier refers to the concept that any increase in public or private investment spending has a more than proportionate positive impact on aggregate income and the general economy. The multiplier attempts to quantify the additional effects of a policy beyond those that are immediately measurable.

INVESTOPEDIA EXPLAINS 'Investment Multiplier'

The investment multiplier tries to determine the financial impact for a public or private project. For instance, extra government spending on roads can increase the incomes of construction workers as well as that of the suppliers of the materials necessary for the project. These people may in turn spend some of the this extra income in the retail sector, thereby boosting incomes of workers there as well.

RELATED TERMS
  1. Consumer Spending

    The amount of money spent by households in an economy. The spending ...
  2. Personal Income

    Total compensation received by an individual. Personal income ...
  3. Discretionary Income

    The amount of an individual's income that is left for spending, ...
  4. Disposable Income

    The amount of money that households have available for spending ...
  5. Consumption Function

    The consumption function is a mathematical formula laid out by ...
  6. Capital Loss Coverage Ratio

    The difference between an asset’s book value and the amount received ...
Related Articles
  1. What Is Fiscal Policy?
    Economics

    What Is Fiscal Policy?

  2. Increase Your Disposable Income
    Options & Futures

    Increase Your Disposable Income

  3. Understanding World Bank Data
    Investing

    Understanding World Bank Data

  4. India Is Eclipsing China's Economy As ...
    Economics

    India Is Eclipsing China's Economy As ...

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center