multiplier

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.

Notes:

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".

See also: Economics, Gross Domestic Product - GDP, Keynesian Economics, Macroeconomics, Marginal Propensity To Consume - MPC, Monetarist Theory, Multiplier Effect

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Multiplier

The investment multiplier which quantifies the overall effects of investment spending on total income. The deposit multiplier which shows the effects of a change in bank deposits on the total amount of outstanding credit and the money supply.

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multiplier

See American currency quotation.