Multiplier (1 Viewer)

[Haku]

a question asks outline how the multiplier can affect the economic activity 2mark.

is it ok to say "the multiplier tell us how much aggregate demand is generated with a certain anount of extra capital injection into an economy. and than give an numerical example."

would that get the marks? or the fact that i was not suppose to use number examples but explain it. Could some one please do the question in simple and concise word only terms?

 

[Haku]

um... help?

 

[Cityboy]

The multiplier = 1/1- MPC , MPC of course being the marginal propensity to consume.

 

[Cityboy]

the multiplier in itself cannot effect ecoinomic activity as it is just a measure of how economic activity is affected by the injeciton of funds into the economy.

The multiplier measures the following:

Person A buys a good, the person he buys the good off then bouys another good, the reciever of the funds from this transaction buys something else with this money, showing that the initial injection is multiplied.

 

[Haku]

um thanks for the reply, but i am not asking how the multiplier works

please read my first post

 

[HayleeKate]

um thanks for the reply, but i am not asking how the multiplier works

please read my first post

Your first answer is ok, but not quite perfect. Perhaps:
The multiplier refers to the flow on affects of an increased injection into the economy in the stimulation of further economic activity. This multiplier effect occurs as an increase in consumption will provide an increased profit or wage for the producer, thus allowing further increases in consumption. It is for this reason the multiplier is dependent on the MPC.

 

[callan_87]

this is a hard question.. i am not actually sure that the multiplier can affect economic activity. i though that the multiplier was a measure of the impact that an injection has on the level of economic activity.

i dont think i could answer that question....

 

[callan_87]

although one could also say that it is dependant on the MPS

 

[HayleeKate]

I think everyones making this question harder than it is. Obviously the 'multiplier' itself doesnt affect economic activity, thats like the CPI affecting inflation, or something crazy. The simple multiplier, represented by k, is the measure, yes. BUT, the 'multiplier effect' is what it measures, and what actually affects economic activity. I have this question, taken from past HSC with the answer my teacher gave me, as I put above. Its refering to the multiplier affect, not the simple multiplier, the numerical value k.

 

[Haku]

Your first answer is ok, but not quite perfect. Perhaps:
The multiplier refers to the flow on affects of an increased injection into the economy in the stimulation of further economic activity. This multiplier effect occurs as an increase in consumption will provide an increased profit or wage for the producer, thus allowing further increases in consumption. It is for this reason the multiplier is dependent on the MPC.

would a cool answer like that get the two marks? or give like a number example which takes like 3-4 lines....

 

[mattchan]

a question asks outline how the multiplier can affect the economic activity 2mark.

Umm.. heres my 2 cents

The multiplier is the factor by which how many times an increase in national income exceeded the original increase in aggregate demand. This Keynesian concept, affects the economy by increasing economic activity from the flow on effect of aggregate demand from the initial stimulation of consumption, exports, investment or government spending. In this way, economic activity is increased through the process of the multiplier.

 

[d_a_n_z]

haha - i use the same textbook as you because my definition is identical.... ( go tim riley?)

 

[HayleeKate]

would a cool answer like that get the two marks? or give like a number example which takes like 3-4 lines....

I'd give you the marks, but im not a teacher nor marker. A numerical example isnt going to take much time, and might be worthwhile to ensure 2 marks, but I think, that answer is better than 1mark it has everything, and they dont give half marks, so you'd probably get 2.