The Working of the Multiplier - 5519 Words

The Multiplier and Keynesian Economics The concept of the multiplier process became important in the 1930s when John Maynard Keynes suggested it as a tool to help governments to achieve full employment. This macroeconomic â€Å"demand-management approach†, designed to help overcome a shortage of business capital investment, measured the amount of government spending needed to reach a level of national income that would prevent unemployment. The theory of multiplier occupies an important place in the modern theory of employment. The concept of multiplier was first developed by F.A. Kahn and was then refined by Keynes in 1930s. Keynes multiplier is also known as the â€Å"Investment or income multiplier† as he refers to the concept with increase in†¦show more content†¦Multipliers can also be used to make forecasts given changes in a sector. Business output multipliers measure the total change in sales resulting from a one-dollar increase in exports. Communities and counties that wish to use this methodology to determine impacts must invest in research that collects data in order to determine what the economic linkages are in a given economy. Several developed countries have developed Input /Output models, which develop these relationships and multipliers. As more Input /Output models are developed for the state, a more accurate relationship between sectors can be established and then multipliers on a regi onal basis can be developed. The theory of multiplier has been used to explain the cumulative upward and downward swings of the trade cycles that occur in a free enterprise capitalist economy. When investment in an economy rises, it has a multiple and cumulative effect on national income, output and employment. As a result, economy experiences a rapid upward movement. On the other hand , when due to some reasons, especially due to adverse change in the expectations of the business class, investment falls, the backward working of the multiplier causes a multiple and cumulative fall in income, output and employmentShow MoreRelatedTravel Agent . Stage 2 Tourism: Task 1 Nature Of Tourism1072 Words   |  5 Pages2017). The job of a travel agent fits into the travel trade sector. Interdependence All of these sectors have to come together for the tourism industry to be able to function smoothly, without one the others fall down. An example of the sectors working together is that accommodation would not work without transport because no-one could get to the accommodation. Without accommodation, visitor services is pointless because if there is nowhere to stay, the tourist will not be visiting the attractionsRead MoreAnswer-Chapter 3-Financial Management836 Words   |  4 PagesOutstanding= Receivables / Average Sales per day AR = 20 X $20000 = $400,000 3-2 Vigo vacations has an equity multiplier of 2.5.The company’s assets are financed assets with some combination of long-term debt and common equity. What is the company’s debt ratio? Answer: The equity multiplier is 2.5. This means that for every dollar of equity the company has $2.5 of assets Equity Multiplier = 2.5 Therefore Equity Ratio = 1/EM Equity Ratio = 1/2.5 = 0.40 the formula is: Debt Ratio + EquityRead MoreUsing Various Protocols That Accurately Reflect The Value Of A Firm1399 Words   |  6 Pagesof product or service. The calculation: starts with EBIT, subtracts out the (T) taxes (or adds in the tax credit on an operating loss) adds in the (D) depreciation, subtracts the (CAPEX) capital expenditures as well as the changes to (NWC) net working capital. This calculation gives you the free cash flow (FCF) for a given period in the future. Calculate the FCF for all the periods projected or at least until the FCF’s stabilize (if they do) and then calculate the terminal value of all future periodsRead MoreWeek 2 Fin515 Homework1102 Words   |  5 Pagesday = Receivables/( Annual sales/365) = 20 days x $20,000= $400,000 Solution: AR = $400,000 3-2 Debt Ratio Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Formula for Debt ratio = Debt Ratio + Equity Ratio = 1 Equity Multiplier = 2.5 Therefore Equity Ratio = 1/EM Equity Ratio = 1/2.4 = 0.40 MEMORIZE this formula: Debt Ratio + Equity Ratio = 1 There for Debt RatioRead MoreThe National Association Of Forensic Economics1339 Words   |  6 Pageslitigation is to achieve as nearly as possible full compensation for the Claimant in respect of the injury sustained In the UK, prior to 1999, economic damages in such litigation were typically assessed by individual judges using rule of thumb multipliers. There are three relevant types of tables, the Ogden Tables, named after Sir Michael Ogden, Victim’s Compensation Fund (VCF) and the Economic Loss Table (EL-E Table); these are the invested methodologies for estimating the compensation model. TheRead MoreStarbucks Ratios1283 Words   |  6 Pages= 55.39 times I. 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The sales to working capitalRead MoreParametric Designs on Montgomery Modular Multiplier1221 Words   |  5 PagesHardware design are based on Montgomery Modular Multiplier design with variable pipeline stages and replication. In this paper we use a general form of algorithms consisting a loop with loop carried dependencies from one iteration to next iteration to map on parametric hardware design with pipelining and replica tion features. We have used an optimization process depend on this pipelined model, and this optimization process apply on to a Montgomery multiplier implementation on a Xilinx XC5VLX50T FPGARead MoreSmart Goals1174 Words   |  5 PagesSMART GOALS : A PERFORMANCE MULTIPLIER A White Paper by: Maj. Gen. BK Bhatia Abstract Accountability of employees is most vital to the growth of an organization. This paper illustrates, with the help of a Case Study, how Goal setting helps an organization to drive performance. Before the AGM- 2005 Board of Directors found it difficult to face the stake holders, more so the investors. The CEO felt that the company could have done better. Managers at all levels murmured that their subordinatesRead MoreCostco Wholesale Corporation Is A Company1156 Words   |  5 Pagesof the two companies’ revenues, net income, working capital and total assets. From the comparison, it is clear that COSTCO Wholesale Corporation business outlook is extremely bright as compared to that of BJ’s Wholesale club. Over the course of the BJ’s Wholesale club has had greater revenues than COSTCO Wholesale Corporation, however, BJ’s Wholesale Club’s liabilities and expenses are on the high side. This has resulted in their net income and working capital to portray the business as a low earning