Question:

In real world, can a multiplier be equal to 10 or even 20?

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Does a multiplier effect play a major role in determining the effectiveness of the policy?

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2 ANSWERS


  1. Not really. It is usually around 1.14


  2. Yes, the multiplier can be very high at 10 or 29 in poor countries with no big wealthy people. The people consume nearly as much as their income; mpc = 0.9 or 0.95

    Yes the multiplier effect can play a major role in determing the effectiveness of economic policy, especially in lifting economies quicker from the recessions and depressions.

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