Sign in Subscribe
1 min read

Multiplier and Accelerator | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)

  • Multiplier effect is when an initial increase in AD leads to further increases in AD.
  • For example
    • government spending increases e.g. Eat Out to Help Out
    • scheme where government spent money to cover half of restaurant bills on certain days
    • this encouraged more people to go out for food after covid
    • greater consumer confidence
    • greater consumer spending on food compared to before
    • greater consumer spending on travel/ tfl/ fuel/ uber/ dessert/ shopping on the way home
    • overall AD increased by more than the initial increase in gov spending
  • k = 1/1-MPC
    • k: multiplier = increase in AD/ initial increase in AD
    • MPC: marginal propensity to consume - how much of an extra £1 would you spend rather than withdraw (save/ spend on imports)
  • Accelerator theory: business spending is more likely to increase after an increase in consumer confidence and consumer spending
  • For example
    • as more people wanted to try new restaurants
    • restaurants could begin to invest in top chefs and top ingredients
    • as they have an expectation of demand

You might also like...

08
Mar

Supply-Side Policies | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)

Supply side policies are the range of policies that can be used to increase the productive capacity of the economy.
1 min read
08
Mar

Contractionary Monetary Policy | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)

Contractionary monetary policy is the use of increased interest rates to cause a left shift in aggregate demand and therefore
1 min read
04
Mar

Tariffs | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)

A tariff is a tax on imports. It is a form of protectionism. Protectionism is a barrier against free trade.
2 min read
27
Feb

Marshall-Lerner Condition | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)

* The Marshall Lerner condition states that * if the currency depreciates * balance of payments will improve * if * ped for imports and
27
Feb

J-Curve | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)

* Normally, when your currency depreciates * exports increase and imports fall so balance of payments improves * However, * The J-curve shows that,