the.com/multiplier effect
One dollar spent echoes through the economy, buying more than itself, again and again.
means The economic principle that an initial injection of spending ripples outward, generating additional rounds of income and spending greater than the original amount.
from Rooted simply in 'multiply' (from Latin multiplicare, 'to make manifold,' from multi- 'many' plus plicare 'to fold') — the idea being that money, like something folded over and over, grows layers beyond its original size. The specific economic sense took shape in early 20th-century macroeconomics, most famously in the work of economists like Keynes and his contemporaries, who used it to describe how government spending could ripple through an economy in successive rounds of income and re-spending, each round smaller than the last but adding up to far more than the initial dollar.
- origin
- Keynes formalized it during the Great Depression
- formula
- 1 divided by 1 minus marginal propensity to consume
- leakage
- savings and imports shrink the echo fast
- real world
- why stimulus checks beat tax cuts for the rich