Application of the Multiplier Effect to Test the Relationship of Total Injections and Withdrawals of the Greek Economy

The multiplier effect of rise in incomes and employment is in equilibrium in a free market economy when total injections, (J), equal total withdrawals, (W). When injections do not equal withdrawals, then, there is disequilibrium in the economy. Withdrawals consist of net saving, net taxes and import expenditure. On the other hand, injections comprises investment, government expenditure and export expenditure. The rise of injections will lead to a rise of the GDP and the value of the multiplier will increase. If injections are less than withdrawals, then national income and inflation will fall. Unemployment will rise and growth will be negative. Towards this direction, the government will help the households by reducing expenditure. Consumers will start to spend and consume less, investments will decrease and aggregate demand will shift to the left. It is worth to mention, that this will happen only after establishing full capacity and full employment. In other words, initially, through the intervention with the government and the reserve bank will increase investments and gross national savings from 80% to 98% of GDP. The purpose is to make sure that there are sufficient jobs, reserves and money to help the low and middle – classes. At the same time, it will increase revenues from the accumulated national savings and the return of investments that the government did in the past. As there will be decrease of investments at this stage, the government will increase substantially the base and interbank interest rates of national and personal savings. The aim will be to help the households that have accumulated wealth and are not working to cover their daily expenses