Its concept in regional economic development: it refers to demonstrating, organizing and driving the surrounding areas through industrial association and regional association. Through circulation and causal accumulation, this effect is constantly strengthened, amplified and expanded. It refers to the degree of chain reaction caused by the increase or decrease of a variable in economic activities. In economics, multiplier effect is more completely expenditure/income multiplier effect, which is a concept of aggregate economics and refers to the disproportionate change of total economic demand caused by the change of expenditure. It is a variable that causes the increase of the final quantity in the form of multiplier acceleration. This is a factor to be considered when formulating macro policies.
Chinese Name: Multiplier Effect mbth: Multiplier Effect Meaning: It is the macro-theoretical support of economic effect: employment, interest and money, multiplier model, open economy, multiplier and finance, types, money (policy), investment or public expenditure, taxation, budget balance, application, dialectics and theoretical support. The theoretical support of Keynesian multiplier theory comes from john maynard keynes's General Theory of Employment, Interest and Money (/ Kloc-0/883- 1946 is briefly described as follows: Take a simple commodity market as an example. A simple commodity market means that only the commodity market is considered and other markets such as the money market and the foreign exchange market are temporarily ignored. In a simple commodity market, when hoarding equals trade balance, supply equals demand, and the national economy is in equilibrium. (1) trade balance: expressed by formula: the trade balance of a country is actually a function of three variables, expressed by model: T = T(g, Y*, y) the connotation of Keynesian multiplier theory, where g represents the real exchange rate of two currencies (g = e. (p */p)). It is proved by analysis that T = T 1-mY, where T 1 stands for "independent trade balance" and m is called "marginal import tendency". (2) Cellar storage and national income: When a country's domestic absorption is less than national income, a part of its income will be stored in the form of monetary assets, which is called "cellar storage" and expressed by H, that is, H = Y-note that cellar storage is different from savings. In this way, we can calculate the national income when the simple commodity market is in equilibrium. The sum of the two formulas is H=-A 1 +sY=T 1 -mY=T, and the solution is y0 = [1(s+m)] (a1+t65438+. Multiplier model (1) Consumption multiplier in closed economy: α =1/s =1/(1-c) =1(1-a), because in closed economy, the national Therefore, Keynesian multiplier plays a greater role in closed economy than in open economy. (2) Investment multiplier: Investment also has multiplier effect on national income. The investment multiplier is the same as the consumption multiplier. This is because consumption, investment and * * * expenditure are isomorphic with domestic absorption: A+C+I+G, their functions are all equivalent to A (marginal propensity to absorb) in the short term, and the multiplier effect is equal to S, because1-A = S. However, it needs to be specially stated that investment I can promote the long-term growth of the national economy, because when the invested product industry (3) *** expenditure multiplier: * * fiscal expenditure (including * * * consumer expenditure and * * * investment expenditure) is a kind of high-efficiency expenditure very similar to residents' investment. * * * Buying goods and services will trigger a series of repeated expenditures. However, the expenditure multiplier will also have the opposite effect. If * * * expenditure falls, while factors such as taxes remain unchanged, the decline of GDP is equal to the change of G multiplied by the multiplier. Therefore, any * * * must know the actual multiplier before taking action when choosing economic policies. Otherwise it will do great harm to the national economy. Open Economy In an open economy, the expansion of independent expenditure has less influence on the expansion of the national economy than under closed conditions. This is because in the process of expenditure expansion of open economy, part of expenditure is used to import foreign goods and services with marginal import tendency, and this expansion effect acts on foreign economy. Then: α= 1/(s+m). For example, the marginal saving tendency of country M is s=0.04 (that is, the savings rate is 4%) and the marginal import tendency is m=0. 16. What is the national income multiplier of that country? α= 1/(s+m)= 1/(0.04+0. 16)= 5； The marginal saving tendency of country Z is s=0.83 (that is, the savings rate is 83%), and the marginal import tendency is m=0. 10. What is the income multiplier of country Z? α =1/(s+m) =1/(0.83+0.1) =1.075. What a difference! The economy of one country is crawling at a low level, while that of another country is developing at a high speed. Multiplier and Finance In real economic life, it is the key to diagnose the economy and formulate countermeasures to grasp the value of multiplier objectively and accurately. Just as doctors must know the effects of different doses when using painkillers, economists and economic decision makers must also know the values of * * * expenditure multiplier and tax multiplier. When the economy grows too fast or the economy is in a long-term downturn, it is necessary to prescribe a powerful medicine for fiscal policy. Before deciding how much tax to increase, how much tax to reduce or how much expenditure to reduce, or how much expenditure to increase, economic diagnostic experts and decision makers must know how big the actual multiplier is. The common types of type multiplier effect in practical application are monetary (policy) multiplier effect, investment or public * * * fiscal expenditure multiplier effect, tax multiplier effect, budget balance multiplier effect and so on. Monetary multiplier effect Monetary (policy) Monetary multiplier is a quantitative expression of the relationship between the base money and the expansion of money supply, that is, the central bank creates or reduces one unit of base money, and the money supply increases or decreases by a multiple. The complete monetary (policy) multiplier is calculated as follows: k=(Rc+ 1)/(Rd+Re+Rc). Among them, Rd, Re and Rc respectively represent the statutory reserve ratio, excess reserve ratio and cash ratio. The basic calculation formula of money (policy) multiplier is: money supply/base money. Money supply is equal to the sum of money (that is, cash in circulation) and demand deposits; The base currency is equal to the sum of money and reserves. Money and loans provided by banks will generate several times the income of their deposits through several activities such as deposits and loans, commonly known as derivative deposits. The size of the money multiplier determines the expansion ability of the money supply. The currency multiplier is determined by the following four factors: (1) statutory reserve ratio. The statutory reserve ratio for time deposits and demand deposits is directly determined by the central bank. The higher the general statutory reserve ratio, the smaller the currency multiplier; Conversely, the greater the currency multiplier. (2) Excess reserve ratio. The ratio of the reserves held by commercial banks that exceed the statutory reserves to the total deposits is called the excess reserve ratio. Obviously, the existence of excess reserves reduces the ability of banks to create derivative deposits. Therefore, the relationship between the excess reserve ratio and the money multiplier also changes in the opposite direction. The higher the excess reserve ratio, the smaller the currency multiplier. Conversely, the greater the currency multiplier. (3) Cash ratio. The cash ratio refers to the ratio of cash in circulation to demand deposits in commercial banks. The cash ratio is positively related to the demand for money. (4) The ratio of time deposits to demand deposits. Because the derivative ability of time deposits is lower than that of demand deposits, central banks have set different statutory reserve ratios for different types of commercial bank deposits. Usually, the statutory reserve ratio of time deposits is lower than that of demand deposits. In this way, even if the statutory reserve ratio remains unchanged, the change of the ratio of time deposits to demand deposits will also cause the change of the actual average statutory reserve ratio, and ultimately affect the size of the currency multiplier. Generally speaking, when other factors remain unchanged, when the ratio of time deposits to demand deposits rises, the currency multiplier will become larger; On the contrary, the currency multiplier will become smaller. In addition to the above four factors, there are two special factors that affect China's currency multiplier: fiscal deposits and credit plan management. The investment multiplier effect of investment or public expenditure means that an initial investment will produce a series of chain reactions, which will double the total social and economic growth. Refers to the degree to which changes in total social demand caused by changes in investment or public expenditure affect the increase or decrease of national income. The investment expenditure of a department or enterprise will be converted into the income of other departments, and the income obtained by this department will be used for consumption or investment after deducting savings, which will be converted into the income of another department. If this cycle continues, national income will increase by multiple of investment or expenditure. The same applies to the reduction of investment. The reduction of investment will lead to the decline of national income by multiple of investment. Public expenditure multiplier and investment multiplier work in the same principle. The multiplier effect of tax refers to the degree to which the increase or decrease of tax reduces or increases the national income. Due to the increase in taxes, both consumer demand and investment demand will decline. A decline in the income of one department will lead to a decline in the income of another department. If this cycle goes on, the national income will drop by the multiple of tax increase, and the tax multiplier will be negative. On the contrary, due to the decrease of tax revenue, private consumption and investment increase, thus affecting the increase of national income through the multiplier, and the tax multiplier is positive at this time. Generally speaking, the tax multiplier is smaller than the investment multiplier and the public expenditure multiplier. Balanced budget multiplier effect Balanced budget multiplier effect means that when the expansion of expenditure is equal to the increase of tax revenue, the expansion of national income is equal to the expansion of expenditure or the increase of tax revenue, and when the decrease of expenditure is equal to the decrease of tax revenue, the decrease of national income is equal to the decrease of expenditure or tax revenue. Apply multiplier effect, including positive and negative effects. When * * * investment or public * * * expenditure is expanded and tax revenue is reduced, the national income will be doubled, resulting in macroeconomic expansion effect; When * * * investment or public * * * expenditure is cut and tax revenue is increased, it will double the contraction of national income, thus producing a macroeconomic contraction effect. Multiplier effect is a factor to be considered whether there is a multiplier effect in the formulation of macro-policies and the implementation of a certain policy in management, and this multiplier effect is exactly what managers are pursuing. The actual effect of multiplier effect, such as the implementation of a promotion plan, managers hope that this plan can have multiplier effect, but as a result, it is often found that multiplier effect is difficult to achieve without the support of other strategies. Another example is the incentive policy. Managers adopt methods such as result motivation and process motivation. Therefore, managers hope to achieve twice the result with half the effort, that is, one measure has multiple effects. The so-called supporting measures are supporting measures to further develop the effect of the original measures, such as incentive measures in management. If there are only incentives, it is impossible to continue to play a role without incentives. There must be corresponding supporting facilities, such as corporate culture. Only by doing these corresponding measures can the multiplier effect be further sustained. Is there a multiplier effect in management? And how to play the multiplier effect? Is there a multiplier effect in the implementation of a policy in management? And this multiplier effect is exactly what managers pursue. For example, the implementation of a promotion plan, we hope that this plan can get twice the result with half the effort, but we often find that it is difficult to achieve twice the result with half the effort without the support of other strategies. Managers certainly hope that management can achieve twice the result with half the effort. But here we should pay attention to a problem, the multiplier effect is not once and for all. Multiplier effect includes a series of measures. Only when these corresponding supporting measures are effective can the multiplier effect be exerted. The so-called supporting measures are the supporting measures to further develop the effect of the original measures. It must match the corresponding corporate culture. Only by taking corresponding measures can the effect be achieved. For example, in the case of incentive policy, managers adopt methods such as result incentive or process incentive, but the best result may only have an effect on some specific behaviors, while the effect of continuous incentive or spontaneous incentive is impossible. Here, managers hope to achieve multiplier effect, that is, a measure produces multiple effects. There are many examples of multiplier effect in ancient China. For example, in a sense, ancient loyalty and filial piety is a multiplier effect. For those who are loyal and filial, the education or encouragement given by the monarch or elders is limited to occasional admonitions or rewards, but this idea has continued. A good multiplier effect has been achieved. Dialectical multiplier effect can't be applied mechanically, otherwise it is a drop in the bucket. In 200 1 year, the United States suffered a "9. 1 1" terrorist attack, and two buildings were destroyed. When Americans were extremely depressed, some ignorant economists jumped out and made some absurd remarks, saying that the terrorist attack was of great benefit to the macro-economy of the United States. Their reason is that the US Congress approved an emergency budget of $40 billion, which created the first round of demand and income growth, and it is estimated that it will be effective within one year. This increase in expenditure will continue to create the next round of demand. After some calculations, economists think that when the American economy is in recession in 200 1 year, the increase of $40 billion will eventually increase the gross national product by 1000 billion ..................................................................................................................., which seems strange. If the loss of two buildings can promote the development of the national economy, why don't Americans blow up several buildings themselves, and why bother terrorists? Someone came to the opposite conclusion according to the multiplier principle. Because the multiplier principle can amplify the advantages and disadvantages, those buildings are very valuable, and the elite who are killed or injured in them are even more priceless, so the American economy will gradually retreat and enter a vicious circle. But it turns out that after "9. 1 1", the American economy did not advance by leaps and bounds, nor did it fail. Are both conclusions wrong? Or is the multiplier effect wrong? In fact, the problem is that there is not one kind of "multiplier effect" in social and economic life, but there are countless kinds. It's not that the "multiplier effect" doesn't exist, but we can't just stare at a "multiplier effect". You know, countless "multiplier effects" will cancel each other out and repel each other, and the result is unpredictable.