Answer to Question #145658 in Macroeconomics for Nabilah Talib

Question

Identify factors that are directly affect the multiplier value and explain how those factors may change the income equilibrium.

Answer 1

Taxes, savings and imports also known as leakages because they determine how much demand leaks out in each round of the multiplier effect, affect the value of multiplier directly.

When total injections equal total withdrawals (leakages), the level of national income will remain constant, and the economy will be in general equilibrium. An economy will grow if the value of injections is greater than the value of withdrawals, or shrink if the value of withdrawals is greater than injections.