Marginal propensity to withdraw
Definition. The marginal propensity to withdraw is the proportion of any additional income that leaks out of the circular flow rather than being spent on domestic output. It is the sum of the marginal propensities to save, to tax and to import.
The multiplier equals one divided by the marginal propensity to withdraw. A larger propensity to withdraw means more leakage from each round of spending, which gives a smaller multiplier effect.
This term belongs to The Multiplier Effect in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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