Khan Academy method is confusing though

Developed means taken to the next level but not the original creator

stupid

Same In AP Macroecon and Im not even going to college, Im doing welding 💀

If firms invest more, this potentially create more gobs and then peaple who had been employed earn a salary which the should spend....when individuals are getting salaries...this increase their purchasing power compared to when they were unemployed which increase aggregate demand in the economy....in addition this will cause firms to produce more outputs in order to meet all the demand which directly cause the GDP to increase. This is also mainly one of the main reason why government spend in an economy, that is, to expect economy growth throught an increase in GDP

Girl it took me forever so the formula is MPC= 1/1-0.6=0.4 = 1/0.4=2.5

Yes that's why it is called multiplier effect. It makes your initial national income much bigger due to the injections(investments,exports,government expenditure on goods and services) inserted into the circular flow of income. You can also use: k=1/MPS+MPM+MPT OR k=1/(1-MPC) OR k=1/MPW where, k is the size/magnitude of the multiplier MPS:marginal propensity to save(change in savings due to change in national income) MPM: marginal propensity to import(change in import expenditure due to change in national income) MPT:marginal propensity to tax(change in tax revenue collected due to change in national income) MPC:marginal propensity to consume/spend(change in consumption due to change in national income)-aka induced consumption MPW:marginal propensity to withdraw(change in all withdrawals due to change in national income)---this is also the sum of the MPS,MPM and MPT

@@thatperson8741 how does my initial national income becomes bigger? do you mean the government? bc it's impossible to get 25b.

Easy. Money has.a cost. If I borrow $100 from you, you should expect something in return for the risk you are shouldering - I might not pay you back; and something for the inconvenience - you don't have the $100 to spend if you should need it. So I agree to pay you back after one year the $100 _plus_ $5 for your trouble. Summary: money has a cost. Now... The lower your interest rates, the less it's going to cost me. Summary: lower interest rates = cheaper money. I would probably buy a house if your interest rate is 1% but if you charge me 50% - no way. The house would end up costing me 50% more which is too expensive and I couldn't afford it any way. Summary: cheaper money leads to more purchasing. Now if there's 10 house's available but only one person buying then the buyer gets his choice. But if there are 1,000 people trying to buy then prices are going to go up - it's a sellers market! Summary: more purchasing leads to inflation. Review: Money has a cost (interest rate) -> lower interest rate is cheaper money -> cheaper money leads to more purchasing -> more purchasing leads to inflation Summary: Lower interest rates implies inflation

www.economicsonline.co.uk/Managing_the_economy/The_multiplier_effect.html Maybe this will help u understand better:) I am not an econs expert, just a student but this is what i think: Since the government tends to be the one implementing taxes on businesses and households, this will cause the marginal propensity to consume(MPC) to decrease as lesser money is diverted to spending, resulting in withdrawals and hence the multiplier decreases. you can use this formula to understand the factors affecting the multiplier better: k=1/MPS+MPM+MPT OR k=1/(1-MPC) OR k=1/MPW where, MPS:marginal propensity to save(change in savings due to change in national income) MPM: marginal propensity to import(change in import expenditure due to change in national income) MPT:marginal propensity to tax(change in tax revenue collected due to change in national income) MPC:marginal propensity to consume/spend(change in consumption due to change in national income)-aka induced consumption MPW:marginal propensity to withdraw(change in all withdrawals due to change in national income)---this is also the sum of the MPS,MPM and MPT hope this helps. have a nice day:)

Powtoon

True and that's not the only simplification the video makes, its just bit sad