Glossary · Macro · Fiscal policy
Spending multiplier
How much total output rises for each dollar of new spending, because the first dollar becomes someone’s income, part of which they spend, and so on. It equals : with a marginal propensity to consume of 0.8, one dollar of government spending raises GDP by up to 5 dollars.
Also called: multiplier effect, Keynesian multiplier, expenditure multiplier
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