The Keynesian Multiplier

The Keynesian multiplier explains how an initial change in spending, like government investment or consumer expenditure, can lead to a larger overall impact on the economy's income and growth. When someone spends money, it creates income for others, who then spend part of that income, generating even more economic activity. This cycle continues, so the total increase in economic output is a multiple of the original spending. The size of this multiplier depends on factors like how much people save versus spend and the overall openness of the economy. In essence, small initial boosts can trigger larger economic growth.