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Economics

Simple Multiplier: k=1/(1-MPC)

The simple multiplier is used to calculate how much an initial change in aggregate demand impacts on national income once it has been cycled through the circular flow of income.

It is calculated by the formula k = 1/(1-MPC) or k=1/MPS

Watch the video to introduce yourself to the simple multiplier in HSC Economics:

 

Examples

Then watch the videos below to see how calculations of ΔY = k X ΔAD are done: