Multiplier Effect (AD Shifts)

k = 1/MPW (= 1/(1 − MPC) with no taxes or imports); illustrative MPC 0.6, so k = 2.5. With spare capacity (perfectly elastic AS) the price level is unchanged while spare capacity remains, so ΔY = k × ΔG: real output rises Y₁→Y₂ from the injection alone and Y₁→Y₃ in total.