Equivalent concentration

The complex multiplier is the multiplier principle in Keynesian economics (formulated by John Maynard Keynes). The multiplier is a rather simplistic version of this. It applies to any change in autonomous expenditure, in other words, a change in consumption, investment, government expenditure or net exports. Each of these operates to increase or reduce the equilibrium level of income in the economy.

• any increase to an injection will be multiplied to result in a higher level of aggregate expenditure.
• Any decrease in an injection will be multiplied to result in a lower lvl of aggregate expenditure.
• Any increase in a withdrawal will be multiplied to result in a lower lvl of Aggregate expenditure.

and...

• Any decrease in a withdrawal will be multiplied to result in a higher lvl of aggregate expenditure.

The size of the multiplier should take account of all sectors. The complex multiplier can be measured by the following formula:

$k=1/[MPS+MRT+MPM]=1/MPW$

where MPS= Marginal propensity to save, MRT= Marginal rate of taxation, MPM= marginal propensity to import. MPW = Marginal propensity to withdraw

Notes

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References

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