WHAT DOES A HIGH MULTIPLIER MEAN? FOR EXAMPLE,IF I SAID THE SPENDING MULTIPLIER IS 5, AND THE TAX MULTIPLIER IS 3,WHAT DOES IT MEAN THAT THEFIRST MULTIPLIER IS HIGHER THAN THE SECOND?...

WHAT DOES A HIGH MULTIPLIER MEAN? FOR EXAMPLE,IF I SAID THE SPENDING MULTIPLIER IS 5, AND THE TAX MULTIPLIER IS 3,WHAT DOES IT MEAN THAT THE

FIRST MULTIPLIER IS HIGHER THAN THE SECOND?

BASICALLY,WHAT DOES A HIGH MULTIPLIER MEAN?

Expert Answers
pohnpei397 eNotes educator| Certified Educator

A high multiplier means that for every dollar the government "spends" (either by spending it or by not taking it in taxes) there is a higher return in terms of having GDP go up.

So, if the government spent $1 billion in stimulus money and the multiplier were 6, that would increase GDP by $6 billion.  If they spent $1 billion and the multiplier were 10, then GDP would go up by $10 billion.

A higher multiplier happens because people spend more of what they get.  Therefore, for each dollar the government spends, GDP goes up more when the multiplier is higher.