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Multiplier Effect

The process by which changes in one variable (the multiplier) sets in motion a sequence of events or changes to other values in a financial table. 

For example: increasing the inflation rate in a funding model could result in compounded inflation being added to the future renewal cost estimates.

Fig. Cash flow table indicating escalation rates and interest rates over a multi-year period.

See also:

Fig. Cash flow table indicating the relationship between opening and closing balances.

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