Multiplier

AAA

DEFINITION of 'Multiplier'

In Keynesian economic theory, a factor that quantifies the change in total income as compared to the injection of capital deposits or investments which originally fueled the growth. It is usually used as a measurement of the effects of government spending on income, and it can be calculated as one divided by the marginal propensity to save.

INVESTOPEDIA EXPLAINS 'Multiplier'

Keynesian economic theory contends, among other things, that any injection into the economy via investment capital, government spending or the like will result in a proportional increase in overall income at a national level. The basic premise of this theory is that increased spending will have carry-through effects which result in even greater aggregate spending over time. The multiplier itself is an attempt to measure the size of those "carry-through effects".

RELATED TERMS
  1. Marginal Propensity To Consume ...

    A component of Keynesian theory, MPC represents the proportion ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  3. Monetarist Theory

    An economic concept which contends that changes in the money ...
  4. Economics

    A social science that studies how individuals, governments, firms ...
  5. John Maynard Keynes

    An author and economist who is well-known for his stance that ...
  6. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Economics

    Understanding Supply-Side Economics

    Does the amount of goods and services produced set the pace for economic growth? Here are the arguments.
  3. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  4. Economics

    Global Rivals Locking Horns In Ukrainian War

    Huge power games which are being played behind the Ukrainian conflict are rooted in a previous revolution, a past Cold War, and an old Russia-West rivalry.
  5. Economics

    Does A Junk Rating Reflect Russia's Fundamentals?

    Moody’s, like other credit rating agencies, has downgraded Russia’s sovereign debt rating to non-investment grade, but does this reflect Russia's economy?
  6. Investing

    What Has Been Groupon’s Growth Strategy?

    Groupon established a strategy with efforts to become a broader force in the e-commerce world and to expand more strongly into international markets.
  7. Economics

    The Impact Of Ending The US Embargo On Cuba

    Many argue that ending the US embargo on Cuba will not only make US consumers happy, but also help the US economy and bring more freedoms to Cuba.
  8. Economics

    This Is A Small Country With Huge Potential to Grow

    Trinidad and Tobago's increased revenue and economic success have been primarily generated by its energy sector, but it still might be best to diversify.
  9. Economics

    Is The US Dependence On Foreign Oil Necessarily A Bad Thing?

    We examine the myths and facts about US dependence upon foreign oil.
  10. Economics

    Popular Places Where U.S. Citizens Need A Visa

    A U.S. passport will get you into many countries, but not everywhere. Here's how to visit five of the most popular destinations that require visas.

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center