​​THE MULTIPLIER (HL)

The Keynesian multiplier:
  • Explain, with reference to the concepts of leakages (withdrawals) and injections, the nature and importance of the Keynesian multiplier. 
  • Calculate the multiplier using either of the following formulas:
 {1}{1 - MPC}}\)
{1}{MPS + MPT + MPM}}\)
  • Use the multiplier to calculate the effect on GDP of a change in an injection in investment, government spending or exports.
  • Draw a Keynesian

What is the Keynesian multiplier?

This week "The Economist explains" is given over to economics. For each of six days until Saturday this blog will publish a short explainer on a seminal idea. Get our daily newsletter WHEN Barack Obama sought to boost America's ailing economy with a fiscal stimulus package worth more than $800 billion in the wake of the financial crisis of 2008, a fierce debate ensued.

Much ado about multipliers

Get our daily newsletter IT IS the biggest peacetime fiscal expansion in history. Across the globe countries have countered the recession by cutting taxes and by boosting government spending. The G20 group of economies, whose leaders meet this week in Pittsburgh, have introduced stimulus packages worth an average of 2% of GDP this year and 1.6% of GDP in 2010.
The Multiplier Oxford
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simulating the keynesian multiplier

1. Ensure that the following roles in the circular flow are represented
2. Decide on the Marginal Propensities to C, T, M, AND S - IT MUST EQUAL 1!
​3. Decide on the initial investment and where it will enter the circular flow (households or firms)
4. Now watch what happens to the money and how many times it passes the point at which it enters the circular flow.
5. What is the total sum of Aggregate Demand (AD) created by the initial investment?
6. What is the size of the MULTIPLIER?
7. Do we want to minimize or maximize the MULTIPLIER?
8. How can we do this?
9. What is the formula for the MULTIPLIER?

the_multiplier_lesson.pdf
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