4. There might be many factors (economic and non-economic) that affect the size of the multiplier. What are some that you think could influence its size? Which ones do you think would make it larger, and which are more likely to make it smaller?

4. Factors that affect the size of the multiplier Economic factors Change in Income: This is the direct variable which makes the change in the multiplier in the economy. Change in Investment level: This has a direct influence over the changing output of the economy. If the investment is reduced the overall output and expansion of the economy will fall and vice versa. Change in savings level: This has the same influence on investment but in the opposite direction since if savings increases the investment falls hence it influences the multiplier. Change in Net exports: This makes changes in the investment which is coming into the economy from the rest of the world. Hence it makes changes in the inflow of money. Non-Economic factors Changes in government policies which has an indirect impact on the flow of money in the economy. External disruptions have led to changes in the economic condition of the economy. For Example, Russia Ukraine war has led to major disruptions and a higher level of inflation globally. Weak political power and destructive rule will lead to a recession in the economy. Recession is due to a lack of increase in income and a weak multiplier effect. For example, the Sri Lankan crisis. The main variable which influences the size of the multiplier is the change in income and the change in the investment or government expenditure (autonomous variable). The variables which make the multiplier larger Increase in Autonomous variable Increase in Investment Increase in government purchases Increase in Autonomous consumption Increase in value of Marginal Propensity to Consume, which increases consumer confidence Decreases in the value of Marginal Propensity to save The variables which make the multiplier smaller Decrease in Autonomous variable Decrease in Investment Decrease in government purchases Decrease in Autonomous consumption Decrease in value of Marginal Propensity to Consume, which increases consumer confidence or increase in the value of Marginal Propensity to save