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Economic Definition of multiplier principle. Defined.

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Term multiplier principle Definition: The cumulatively reinforcing induced interaction between consumption, production, factor payments, and income that amplifies autonomous changes in investment, government spending, exports, taxes, or other shocks to the macroeconomy. The multiplier principle is so named because relatively small autonomous changes generate relatively larger, or multiple, induced changes in aggregate production. This principle is commonly represented by a multiplier, which is a specific number with a value greater than one.

 

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