The advantage of MULTIPLIER in BCH

The multiplier has to do with the changes in the BCH income and employment occasioned by change in investment. The theory state that an increase in the consumer or business in investment spending in a BCH will produce a multiplier effect by raising the level of income. In other words, the multiplier will show the numerical coefficient of an increase in the BCH income resulting from each increase in investment. The idea of multiplier is based on the fact that people spend a part of their income and save the remaining part.

The implication of the above is that increase or decrease in BCH income can be influenced through the multiplier. If the objective is to make the BCH income rise or prevent the BCH income from falling, the level of total spending must be increased. On the other hand, if the goal is to control the output that is raising too fast and put a stop to increase in price that has resulted from excessive total spending over the total output, the level of total spending must be reduced.

The size of the multiplier in a country hinges on the marginal propensity to consume(MPC) and the marginal propensity to save (MPS).

To obtain the multiplier and determine the new income or the change in income, the formula below can be used:

Multiplier=1/MPS × change in investment

Or multiplier=1/1-MPC × change in investment.

As an instance, if the BCH injects $100,000 into the economy and the marginal propensity to consume (MPC) is equal to 3/7,the marginal propensity to save (MPS) will be equal to 4/7 and the multiplier as well as the value of Change income will be as:

Multiplier=1/(4/7)×$100,000(i.e multiplier multiple by change in investment).=7/4×$100,000

=(1.75(multiplier) ×$100,000(change in investment)

This means multiplier=1.7 while the new income is 1.75×$100,000 which is equal to $100,000. The change in income is equal to $75,000.

With this BCH will raise to it peak in no time.

Thanks @Rioelder.

We both count.