Multipliers -

Multipliers - 

• The Spending Multiplier Effect
• An initial change in spending causes a larger change in aggregate spending or demand
• Multiplier = change in AD / change in spending (C, I, G, or X)
• Why?
• Expenditures and income flow continuously which sets off a spending increase in the economy
• Multiplier = 1 / 1 - MPC OR 1 / MPS
• Multipliers are positive when increasing in spending and negative when decreasing in spending
• Tax Multipler 
• When the govt taxes, multiplier works in reverse
• Why? Money is leaving the circular flow
• Note: It's negative
• = -MPC / 1 - MPC or -MPC / MPS
• If there is a tax cut, then multiplier is positive because there is more money in the circular flow