[{"data":1,"prerenderedAt":268},["ShallowReactive",2],{"term:fiscal-multiplier":3},{"term":4,"related":251},{"id":5,"title":6,"body":7,"category":232,"description":233,"extension":234,"faq":235,"meta":236,"navigation":237,"path":238,"related":239,"seo":244,"stem":245,"takeaways":246,"__hash__":250},"terms\u002Fterms\u002Ffiscal-multiplier.md","Fiscal Multiplier",{"type":8,"value":9,"toc":225},"minimark",[10,15,19,22,26,218,222],[11,12,14],"h2",{"id":13},"understanding-fiscal-multiplier","Understanding Fiscal Multiplier",[16,17,18],"p",{},"Government spending becomes someone's income, part of which they spend, which becomes someone else's income, and so on. The multiplier measures the total effect on GDP.",[16,20,21],{},"In the simplest Keynesian model the multiplier is 1\u002F(1 − MPC). Real-world estimates are much smaller because of taxes, imports, saving and policy responses, and they are larger in deep recessions with idle resources than near full employment.",[11,23,25],{"id":24},"formula","Formula",[27,28,31],"span",{"className":29},[30],"katex-display",[27,32,35,80],{"className":33},[34],"katex",[27,36,39],{"className":37},[38],"katex-mathml",[40,41,44],"math",{"xmlns":42,"display":43},"http:\u002F\u002Fwww.w3.org\u002F1998\u002FMath\u002FMathML","block",[45,46,47,75],"semantics",{},[48,49,50,54,58],"mrow",{},[51,52,53],"mtext",{},"Simple multiplier",[55,56,57],"mo",{},"=",[59,60,61,65],"mfrac",{},[62,63,64],"mn",{},"1",[48,66,67,69,72],{},[62,68,64],{},[55,70,71],{},"−",[51,73,74],{},"MPC",[76,77,79],"annotation",{"encoding":78},"application\u002Fx-tex","\\text{Simple multiplier} = \\frac{1}{1 - \\text{MPC}}",[27,81,85,114],{"className":82,"ariaHidden":84},[83],"katex-html","true",[27,86,89,94,102,107,111],{"className":87},[88],"base",[27,90],{"className":91,"style":93},[92],"strut","height:0.8889em;vertical-align:-0.1944em;",[27,95,99],{"className":96},[97,98],"mord","text",[27,100,53],{"className":101},[97],[27,103],{"className":104,"style":106},[105],"mspace","margin-right:0.2778em;",[27,108,57],{"className":109},[110],"mrel",[27,112],{"className":113,"style":106},[105],[27,115,117,121],{"className":116},[88],[27,118],{"className":119,"style":120},[92],"height:2.0908em;vertical-align:-0.7693em;",[27,122,124,129,214],{"className":123},[97],[27,125],{"className":126},[127,128],"mopen","nulldelimiter",[27,130,132],{"className":131},[59],[27,133,137,205],{"className":134},[135,136],"vlist-t","vlist-t2",[27,138,141,200],{"className":139},[140],"vlist-r",[27,142,146,177,188],{"className":143,"style":145},[144],"vlist","height:1.3214em;",[27,147,149,154],{"style":148},"top:-2.314em;",[27,150],{"className":151,"style":153},[152],"pstrut","height:3em;",[27,155,157,160,164,168,171],{"className":156},[97],[27,158,64],{"className":159},[97],[27,161],{"className":162,"style":163},[105],"margin-right:0.2222em;",[27,165,71],{"className":166},[167],"mbin",[27,169],{"className":170,"style":163},[105],[27,172,174],{"className":173},[97,98],[27,175,74],{"className":176},[97],[27,178,180,183],{"style":179},"top:-3.23em;",[27,181],{"className":182,"style":153},[152],[27,184],{"className":185,"style":187},[186],"frac-line","border-bottom-width:0.04em;",[27,189,191,194],{"style":190},"top:-3.677em;",[27,192],{"className":193,"style":153},[152],[27,195,197],{"className":196},[97],[27,198,64],{"className":199},[97],[27,201,204],{"className":202},[203],"vlist-s","​",[27,206,208],{"className":207},[140],[27,209,212],{"className":210,"style":211},[144],"height:0.7693em;",[27,213],{},[27,215],{"className":216},[217,128],"mclose",[11,219,221],{"id":220},"example","Example",[16,223,224],{},"With an MPC of 0.8, the simple multiplier is 1\u002F(1 − 0.8) = 5: $100 of new spending could raise output by up to $500 in the basic model.",{"title":226,"searchDepth":227,"depth":227,"links":228},"",2,[229,230,231],{"id":13,"depth":227,"text":14},{"id":24,"depth":227,"text":25},{"id":220,"depth":227,"text":221},"economy","How much total output changes for each dollar of government spending or tax cuts.","md",[],{},true,"\u002Fterms\u002Ffiscal-multiplier",[240,241,242,243],"marginal-propensity-to-consume","fiscal-policy","crowding-out","keynesian-economics",{"title":6,"description":233},"terms\u002Ffiscal-multiplier",[247,248,249],"The multiplier compares the change in GDP with the initial change in spending.","Textbook formula: 1\u002F(1 − MPC).","Real-world multipliers vary and are usually below the textbook value.","rwSM6IBuOQZttcK0vEXHugdGI8RtXJdh3_pBfQNa26I",[252,256,260,264],{"title":253,"description":254,"path":255},"Crowding Out","When government borrowing reduces private investment by pushing up interest rates.","\u002Fterms\u002Fcrowding-out",{"title":257,"description":258,"path":259},"Fiscal Policy","The use of government spending and taxes to influence the economy.","\u002Fterms\u002Ffiscal-policy",{"title":261,"description":262,"path":263},"Keynesian Economics","The school of thought that total demand drives output and employment in the short run, and that policy can stabilize it.","\u002Fterms\u002Fkeynesian-economics",{"title":265,"description":266,"path":267},"Marginal Propensity to Consume (MPC)","The share of an extra dollar of income that a household spends.","\u002Fterms\u002Fmarginal-propensity-to-consume",1793374005116]