The Multiplier

The Multiplier is the amount by which any injection of funds is multiplied by the time it has worked its way through the economy.

What determines the size of the Multiplier?  

  How does this Initial Injection
become this?Multiplied



The higher the Marginal Propensity to Consume (MPC) the more money is spent in the economy. If we as a country spend 80% of any extra income we receive, then we have a national MPC of 80%, or 0.8.   If, however, we spend only 50% of our money then we have a national MPC of 50%, or 0.5.

The Paradox

If we want a wealthy economy we must spend, spend, spend.  

However, if we want to be wealthy ourselves, we must save.

Click on the Calculations Page if you would like to learn how the Multiplier is calculated


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