Apr 21 2012
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.
About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author