Income Multiplier

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Definition

The Income Multiplier measures the total change in income in sector j per $1 change in direct income to sector j. The labour income multiplier measures the ratio of the total economy-wide induced/indirect labour income of all industries/businesses in the economy to the company’s labour income.

Formula

The income multiplier, where U1, U 1 are the incomes of sectors i or j in millions of dollars. The numerator is the sum of interdependence coefficients for sector j weighted by average income per unit of output in each sector, or the direct plus indirect effects of a unit change in final demand. The denominator is average income per unit of output in sector j, or the direct effect of a unit change in final demand.

References

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