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Unit 2 Macro: The Multiplier Process and Multiplier Effect

Geoff Riley

24th November 2013

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An initial change in aggregate demand can have a much greater final impact on the level of equilibrium national income. This is known as the multiplier effectIt comes about because injections of new demand for goods and services into the circular flow of income stimulate further rounds of spending – in other words “one person’s spending is another’s income." This can lead to a bigger eventual effect on output and employment

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Geoff Riley

Geoff Riley FRSA has been teaching Economics for nearly forty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD and Revision conferences in the UK and overseas.

@tutor2uGeoff

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