The understanding of multiplier and its function

The understanding of multiplier and its function


Multiplier is a term in macroeconomics. It refers to the change of variables (such as GDP or money supply) caused by the change of exogenous variables (such as government expenditure or bank reserves) per unit. For example, I spent 100 yuan on a pile of things in the market, and the market vendors' income increased. They would use one of these income to



What is the function of balanced budget and multiplier mechanism?


Balanced budget refers to the increase of government expenditure and the corresponding increase of the same amount of tax. That is, when the increase of government tax is equal to the increase of government purchase, it is called budget balance. Balanced budget multiplier refers to the ratio of the change of national income to the change of government purchase or tax when government purchase and tax increase or decrease in the same amount