The Multiplier (Grade 12 NSC Matric Economics): Flashcards

Small spending change creates much larger change in economy output

$M = \frac{1}{1-mpc}$

$M = \frac{1}{mps}$

Proportion of extra income that people spend

Proportion of extra income that people save

$mpc + mps = 1$

$M = \frac{\Delta Y}{\Delta I}$

Larger mpc creates bigger multiplier

mps, mrt (taxation), mpm (imports)

John Keynes