In Economics, What Is a Multiplier?
A multiplier is something that affects a system by making a change from the outside, causing interconnected elements of the system to move in response. Some examples of multipliers include fiscal policy decisions made by governments and the ability of banks to lend. In both cases, in addition to having immediate effects like raising taxes or making more credit available, the multiplier is associated with a chain reaction and a series of changes throughout the system. These changes can be predicted by economists to gauge the impact before the decision is made. Multipliers are used to measure proportional changes in a system. Economists look both at positive changes that can be accomplished with a single multiplier, such as a decrease in the unemployment rate caused by more availability of credit and subsequent employment opportunities, and negative changes, like a decrease in consumer spending caused by tax increases. When developing economic and fiscal policy, the multiplier effect mus
