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In economics, a numerical coefficient showing the effect of a change in one economic variable on another. One macroeconomic multiplier, the autonomous expenditures multiplier, relates the impact of a change in total national investment on the nation's total income; it equals the ratio of the change in total income to the change in investment. If, for example, the total investment in an economy is increased by $1 million, a chain reaction of increases in consumption is set off. Producers of raw materials used in the investment projects and workers employed in the projects gain $1 million in income. If they spend on average three-fifths of that income, $600,000 will be added to the incomes of others. The makers of the goods they buy will in turn spend three-fifths of their new income on consumption. The process continues such that the amount by which total income increases may be computed by an algebraic formula. In this case, the multiplier equals 1/(1 − 3/5), or 2.5. This means that a $1 million increase in investment creates a $2.5 million increase in total income. Other multipliers include the money multiplier, which measures money creation resulting from a change in monetary policy; the government spending multiplier, which measures the change in national income resulting from changes in fiscal policy; and the tax multiplier, which measures the changes in national income resulting from a change in taxes. The concept of the multiplier process was popularized in the 1930s by John Maynard Keynes as a means of measuring the effect of government spending.

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Encyclopedia Britannica, 2008. Encyclopedia Britannica Online.

The term multiplier may refer to:

In electrical engineering:

- Binary multiplier, a digital circuit to perform rapid multiplication of two numbers in binary representation
- Multiplication ALU, a digital circuit that multiplies two numbers in a digital system
- Analog multiplier, a device that multiplies two analog signals

In macroeconomics:

- Multiplier (economics), an effect that occurs when a change in spending causes a disproportionate change in aggregate demand.
- Money multiplier, a term that represents the maximum amount of money that the banking system generates with each dollar of excess reserves.

In warfare:

- Force multiplier, a factor that dramatically increases the combat-effectiveness of a given military force.

In mathematics:

- Lagrange multiplier, a scalar variable used in mathematics to solve an optimisation problem for a given constraint.
- multiplier (Fourier analysis), an operator that multiplies the Fourier coefficients of a function by a specified function (known as the symbol).
- multiplier of orbit
- Characteristic multiplier

In fishing:

- A multiplier fishing reel creates less friction when casting.

In clock signal:

- A CPU multiplier allows a CPU to perform more cycles per single cycle of the front side bus.

In lotteries

- The PowerPlay is a multiplier for the lower-tier prizes in the US Powerball game. In the rival Mega Millions, it exists only in Texas, and is known as the Megaplier. Some lotteries that sell Powerball also offer Hot Lotto; whose Sizzler automatically triples non-jackpot prizes.

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Last updated on Thursday September 25, 2008 at 10:06:01 PDT (GMT -0700)

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This article is licensed under the GNU Free Documentation License.

Last updated on Thursday September 25, 2008 at 10:06:01 PDT (GMT -0700)

View this article at Wikipedia.org - Edit this article at Wikipedia.org - Donate to the Wikimedia Foundation

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