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The Multi-Sector Multiplier

John S. Chipman

Abstract

The concept of the multiplier is extended to an economy composed of a number of sectors, such as countries, regions, industries, classes, and functional groups, or individuals, firms, and governments. The economy should be divided to such anextent as to maximize the stability of the parameters. If all the participating groups have the same marginal propensity to spend, the conventional multiplier formula is obtained. Some properties of such a system are described--in particular, the conditions for dynamic stability; the effect of changes in relative prices is also introduced.