Share This Article:

Economic Definition of expenditure multiplier. Defined.

Offline Version: PDF

Term expenditure multiplier Definition: The ratio of the change in aggregate output (or gross domestic product) to an autonomous change in an aggregate expenditure (consumption expenditures, investment expenditures, government purchases, or net exports). The expenditure multiplier is a key component of Keynesian economics and the study of macroeconomics, illustrating how a relatively small change in an expenditure like investment can trigger larger changes in aggregate output. The value of the expenditure multiplier depends on the marginal propensity to consume and other induced expenditures. Knowing the value of the expenditure multiplier can also indicate the amount of policy-induced government expenditures are needed to achieve a given level of aggregate output (presumably full-employment output).


« expectations | explicit collusion »


Alphabetical Reference to Over 2,000 Economic Terms