MULTIPLIER: The cumulatively reinforcing interaction between consumption and production that amplifies changes in investment, government spending, or exports. In other words, if businesses decide to increase investment expenditures on capital goods or if government decides to expand the size of the already bloated federal deficit by spending more on national defense, then our economy's production and income are likely to increase by some multiple of this spending. The amplified increase in production and income, usually from 2 to 5 times, is what gives us the term "multiplier." The process is based on the circular flow idea the people receive income by producing goods and then spend this income on additional production.

     See also | consumption | production | investment | government purchases | net exports | income | circular flow | Keynesian economics | business cycle | gross domestic product | expansion | contraction | recovery |

MULTIPLIER, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: February 4, 2023].

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A simultaneous increase in the willingness and ability of buyers to purchase a good at the existing price, illustrated by a rightward shift of the demand curve, and an increase in the willingness and ability of sellers to sell a good at the existing price, illustrated by a rightward shift of the supply curve. When combined, both shifts result in an increase in equilibrium quantity and an indeterminant change in equilibrium price.

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