Topics

Fiscal Multiplier

The fiscal multiplier estimates the final change in real national income (GDP) that results from an initial (exogenous) change in government spending and/or revenue plans.

For example, if a £5 billion increase in government spending on flood defence leads to a £12 billion final increase in real GDP, then the fiscal multiplier = £12 billion / £5 billion = +2.4

© 2002-2023 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.

Back to top