A number by which another number is multiplied. In economics, a factor that amplifies the effect of an initial change throughout a system.
From Latin 'multiplicare' meaning to increase or multiply, with the agent suffix '-er.' The mathematical term evolved into specialized usage in economics during the 20th century, particularly in Keynesian theory.
The economic multiplier effect means that spending $1 can generate more than $1 of economic activity as that money circulates through the economy - a waiter's tip becomes the waiter's grocery money, which becomes the grocer's rent payment, and so on. This concept fundamentally changed how economists think about government spending and stimulus policies.
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