What is the multiplier effect???

Multiplier effect is an economic term.

http://www.investopedia.com/terms/m/multipliereffect.asp#axzz1lXi2mBhS

Applied to the Balkans, it could mean that inter-ethnic hatreds have kept multiplying.

Thank you again, Ms. Sue! :) (:

You're welcome -- whatever name you're using today.

We'd appreciate it if you kept the same name for all of your posts.

okay, can I keep the one I have now????

Sure.

thanks (again)

The multiplier effect refers to the impact that an increase in spending or investment has on the overall economy. It measures how much more output or income is generated for each unit of initial spending. To understand the multiplier effect, you need to consider two main components: marginal propensity to consume (MPC) and marginal propensity to save (MPS).

The first step in calculating the multiplier effect is to determine the MPC, which is the proportion of additional income that individuals or households spend rather than save. For example, if an individual's income increases by $100 and they spend $80 out of that increase, their MPC is 0.8 (80/100). The MPS is the proportion of additional income that individuals or households save. Using the same example, if the individual saves $20 out of the $100 increase, the MPS is 0.2 (20/100).

The multiplier effect is then calculated using the formula: Multiplier = 1 / (1 - MPC)

For example, if the MPC is 0.8, the multiplier would be 1 / (1 - 0.8) = 1 / 0.2 = 5. This means that for every initial increase in spending or investment, the overall output or income will increase by a factor of 5.

To understand this concept further, consider a government deciding to invest an additional $1 billion in infrastructure. This investment will lead to more jobs and income for workers involved in the construction projects. Those workers, in turn, will spend a portion of their income on goods and services, which will increase the income of other businesses. These businesses will then hire more workers, leading to a subsequent increase in income and spending, and so on. The multiplier effect shows how the initial investment of $1 billion can lead to a much larger increase in overall economic activity.

Overall, the multiplier effect highlights the interconnectedness of different sectors of the economy and how changes in spending or investment can have a ripple effect, leading to a larger overall impact on the economy.