Multiplier (economics) - General Method

General Method

The general method for calculating long-run multipliers is called comparative statics. That is, comparative statics calculates how much one or more endogenous variables change in the long run, given a permanent change in one or more exogenous variables. The comparative statics method is an application of the Implicit Function Theorem.

Dynamic multipliers can also be calculated. That is, one can ask how a change in some exogenous variable in year t affects endogenous variables in year t, in year t+1, in year t+2, and so forth. A graph showing the impact on some endogenous variable, over time (that is, the multipliers for times t, t+1, t+2, etcetera), is called an impulse-response function. The general method for calculating impulse response functions is sometimes called comparative dynamics.