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Multiplier Effect of Investment Spending definitions

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Termini in questo insieme (14)

  • Investment Spending
    Expenditure by firms on new equipment or business expansion, initiating a chain reaction of increased income and consumption.
  • Household Income
    Earnings received by individuals or families, which rise when firms hire more workers due to increased business activity.
  • Consumer Spending
    Expenditures by households on goods and services, which grow as incomes rise from initial business investments.
  • Marginal Propensity to Consume
    Fraction of additional income that households spend rather than save, determining the strength of the spending chain reaction.
  • Marginal Propensity to Save
    Portion of extra income that households save instead of spend, inversely related to the multiplier's size.
  • Multiplier Effect
    Process where an initial increase in spending leads to multiple rounds of additional income and consumption throughout the economy.
  • Chain Reaction
    Series of successive increases in income and spending triggered by an initial economic stimulus.
  • Gross Domestic Product
    Total value of all goods and services produced, which rises by more than the initial investment due to repeated spending rounds.
  • Infinite Series
    Mathematical concept representing endless rounds of spending, summed to calculate the total impact of the multiplier.
  • Multiplier Formula
    Equation 1/(1-MPC) or 1/MPS, used to determine how much total output increases from an initial spending boost.
  • Initial Spending
    Original amount invested or spent, which sets off the multiplier process in the economy.
  • Spending Round
    Each cycle in which new income is partially spent, generating further economic activity.
  • Denominator
    Bottom part of the multiplier formula, where a smaller value leads to a larger overall multiplier.
  • Series Analysis
    Mathematical approach to summing repeated rounds of spending, underlying the logic of the multiplier calculation.