Transfer payments multiplier
Encyclopedia
The Transfer payments multiplier (or Transfer payment multiplier) is the multiple by which
Aggregate demand
Aggregate demand
In macroeconomics, aggregate demand is the total demand for final goods and services in the economy at a given time and price level. It is the amount of goods and services in the economy that will be purchased at all possible price levels. This is the demand for the gross domestic product of a...

 will increase, when there is an increase in transfer payments (e.g. welfare spending, unemployment payments). Changes in spending usually lead to a larger than one for one increase in Aggregate demand, because any increase in household incomes caused by the increase in spending also increases in consumption
Consumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...

spending, which further increases Aggregate demand.
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