Q: What causes multiplier effect occurs?

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The travel multiplier measures the effect of the initial tourism spending and the chain of spending that follows.

If the full multiplier for G (i.e. ignoring crowding out effects) is = change in G/Multiplier Then the tax multiplier is = change in T x marginal propensity to consume/multiplier since the mpc is between 0 and 1 the tax multiplier is less. Intuitively it is not difficult to see why, the change tax enters spending decisions through consumption and consumption is dependant on the mpc. Whereas as G affects spending decisions directly - it is a injection into the economy that does not have to work through some indirect source to have an effect on the economy.

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The multiplier. The multiplicand is multiplied by the multiplier to create the product.

Multiplier x multiplicand = product

Related questions

The multiplier effect, is when one job in the mining industry creates 4 new jobs in other industries

Itself.

yes

The travel multiplier measures the effect of the initial tourism spending and the chain of spending that follows.

The multiplier effect describes how an increase in some economic activity starts a chain reaction that generates more activity than the original increase. The multiplier effect demonstrates the impact that reserve requirements set by the Federal Reserve have on the U.S. money supply.

Multiplier Effect

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A static multiplier assumes that an investment change, whether good or bad, causes an income spike or loss immediately. This is not always so.

The Kirk effect occurs at high current densities in bipolar junction transistors and causes a dramatic increase in the transit time of a transistor.

by dividing investment with 1 subtract consumption function

The Multiplier Effect

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