People also know this effect as the investment spending multiplier, or simply the investment multiplier. The exogenous spending multiplier, or just the spending multiplier, shows the concept that any increase in spending results in a more than proportional increase in the national income (GDP). This is described further in the money multiplier calculator. Another example is the money multiplier, where changes in the money supply cause changes in the monetary base of the central bank. One example of a multiplier is the subject of this article - the spending multiplier.
In other words, multipliers most commonly refer to increases in cash spending/investments greater than a proportional increase in the 'cash base' - creating growth opportunities and snowball effects. In finance, a multiplier is a factor that, when changed, causes other factors to change.Ī multiplier effect takes place when the increase in said factor causes a disproportional increase in other related factors.
