Multiplier effect
What Multiplier effect means in Economics A-Level, as defined for AQA.
Definitions of Multiplier effect
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Reference: AQA
The process whereby an initial injection into the circular flow generates successive rounds of induced expenditure, so that one person's spending becomes another person's income.
Occurs when an initial injection into the circular flow of income leads to a proportionately larger final increase in real national income.
Where an initial injection leads to a greater final increase in aggregate demand.
Topics that use Multiplier effect
- Aggregate demand and the level of economic activity (AQA A-Level)
- Fiscal policy (AQA A-Level)
Related terms
- Aggregate demand
- Aggregate demand and supply
- Aggregate supply
- Automatic stabilisers
- Budget balance
- Budget deficit
- Budget surplus
- Circular flow
Using Multiplier effect in the exam
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