Enhance Your Learning with Economics - Multiplier Effect Flash Cards for quick understanding
The concept in economics where an initial increase in spending leads to a larger increase in national income and economic growth.
Multiplier = 1 / (1 - Marginal Propensity to Consume)
The proportion of additional income that individuals choose to spend on consumption rather than saving.
The proportion of additional income that individuals choose to save rather than spend on consumption.
The size of the marginal propensity to consume, leakages in the economy, and the presence of imports are factors that affect the multiplier effect.
Savings, taxes, and imports are considered leakages as they reduce the amount of money circulating in the economy.
Investment, government spending, and exports are considered injections as they add money to the economy.
If the MPC is 0.8, an initial increase in government spending of $100 can lead to a total increase in national income of $500.
The multiplier effect assumes constant MPC, ignores time lags, and does not account for changes in interest rates or inflation.
The use of government spending and taxation to influence the economy and achieve economic objectives.
The use of interest rates and money supply to control inflation, stabilize the economy, and promote economic growth.
The total demand for goods and services in an economy at a given price level and time period.
The total supply of goods and services in an economy at a given price level and time period.
An increase in the production and consumption of goods and services in an economy over a specific period of time.
A significant decline in economic activity, characterized by a decrease in GDP, employment, and trade.
A sustained increase in the general price level of goods and services in an economy over a period of time.
A sustained decrease in the general price level of goods and services in an economy over a period of time.
A situation of high inflation combined with high unemployment and stagnant economic growth.
Statistics used to measure and analyze the performance of an economy, such as GDP, inflation rate, and unemployment rate.
The total value of all goods and services produced within a country's borders in a specific time period.
The percentage of the labor force that is unemployed and actively seeking employment.
The cost of borrowing money or the return on investment, expressed as a percentage.
The value of one currency in relation to another currency, determining the cost of imports and exports.
The difference between the value of a country's exports and the value of its imports.
A situation where the value of a country's exports exceeds the value of its imports.
A situation where the value of a country's imports exceeds the value of its exports.
Investment made by a company or individual in one country into business interests located in another country.
The process of increasing interconnectedness and interdependence among countries through the exchange of goods, services, information, and ideas.
The economic policy of restraining trade between countries through methods such as tariffs, quotas, and subsidies.
The policy of allowing goods and services to be traded between countries without restrictions or barriers.
The ability of a country to produce a good or service at a lower opportunity cost than other countries.
The value of the next best alternative that must be forgone in order to choose a particular option.
The economic model that determines the price and quantity of a good or service in a market.
The point at which the quantity demanded of a good or service equals the quantity supplied, resulting in a stable price.
A measure of the responsiveness of the quantity demanded of a good or service to changes in its price.
A measure of the responsiveness of the quantity supplied of a good or service to changes in its price.
A market structure characterized by a single seller of a unique product with no close substitutes.
A market structure characterized by a few large firms dominating the market and interdependent decision-making.
A market structure characterized by many small firms producing identical products and no barriers to entry or exit.
A market structure characterized by many firms producing differentiated products and some degree of market power.
The costs or benefits that are not reflected in the market price of a good or service, affecting third parties.
Goods or services that are non-excludable and non-rivalrous, provided by the government for the benefit of society.
The unequal distribution of income among individuals or households in an economy.
The state of being extremely poor, lacking the resources or means to meet basic needs.
The total value of assets owned by an individual, including money, property, investments, and possessions.
A measure of income inequality within a population, ranging from 0 (perfect equality) to 1 (perfect inequality).
The knowledge, skills, and abilities possessed by individuals, contributing to their productivity and economic value.
The total number of people who are employed or actively seeking employment.
The amount of output produced per unit of input, such as labor, capital, or time.
The process of creating and implementing new ideas, products, or methods that result in improved efficiency or effectiveness.
The activity of setting up a business or businesses, taking on financial risks in the hope of profit.
The sustained, concerted actions of policymakers and communities to improve the standard of living and economic health of a country.