Overview
Spending and tax multipliers are essential concepts in economics that help us understand how fiscal policy impacts the economy. When the government increases spending or cuts taxes, it can lead to a ripple effect, boosting overall economic output. The size of this effect depends on factors like the ...
Key Terms
Example: If the government spends $1 million, and the multiplier is 2, the total economic output increases by $2 million.
Example: Increasing government spending during a recession is an example of expansionary fiscal policy.
Example: An increase in consumer spending raises aggregate demand.
Example: A growing GDP indicates a healthy economy.
Example: A tax cut increases disposable income, allowing consumers to spend more.
Example: Economic output can be measured by GDP.