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A-Level Economics · AD shift right (with multiplier) diagram question

Which distance measures the EXTRA real output the multiplier delivers, over and above the initial injection?

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The diagram

The answer

The distance J L. Y₂ to Y₃ — the second shift only. The initial injection got you H to J; the recycled income got you J to L. Split the gain in two: H→J is what the government's own spending bought, J→L is what the multiplier added on top. The eventual increase in real output is significantly larger than the initial fiscal injection — that gap, JL, IS the multiplier effect on the diagram.

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