Apr 21 2012

Multiplier effect

Published by at 7:51 pm under

The theory that a particular increase in private or government spending (C, I, G, or Xn) in an economy will lead to a larger overall increase in GDP than the initial change in spending, due to the fact that the increase in incomes that result will lead to further increases in private spending throughout the economy. The size of the multiplier effect depends on the spending multiplier.

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