Multiplier (k)
Final change in national income ÷ initial injection.
The multiplier
Key definitions
MPW
Marginal propensity to withdraw = MPS + MPT + MPM.
MPC
Extra consumption per extra £ of income.
MPS
Extra saving per extra £ of income.
MPT
Extra tax per extra £ of income.
MPM
Extra imports per extra £ of income.
k = 1 ÷ MPW
Smaller leakages → larger multiplier.
Negative multiplier
Fall in spending causes larger fall in Y.
Spare capacity
Keynesian: larger multiplier when below Yfe.
Autonomous injection
Spending not caused by current Y (e.g. ΔG).
Key concepts
Use multiplier calculator for practice — enter MPC and injection to see exact ΔY in £bn.
Higher import propensity reduces k for open UK economy.
Example: k = 2.5 and ΔG = £8bn → national income rises by £20bn (not just 'a greater change').
Relevant tips
- Show working: MPW → k → ΔY.
- Diagram backlog: multiplier AD shifts on AD/AS.