The direct plus indirect intensities are input-output multipliers derived from the input-output tables. They are used to assess the effects on energy use and greenhouse gas emissions of an exogenous change in final demand for the output of a given industry.
They provide a measure of the interdependence between an industry, the rest of the economy, and the use of energy or production of greenhouse gas emissions.
Direct effects measure the initial requirements for an extra dollar's worth of output of a given industry. The direct effect on the output of an industry is a change in output equal to the change in final demand.
Indirect effects measure the changes due to inter-industry purchases as they respond to the new demands of the directly affected industries. This includes the chain reaction of output up the production stream since each of the products purchased will require, in turn, the production of various inputs. Note that the energy calculations include an adjustment to account for the production of electricity from fossil fuels which would be double-counted if both the electricity consumption and the fossil fuel consumption used to produce it were included in the model.
Induced effects measure the changes in the production of goods and services in response to consumer expenditures induced by additional households income (i.e., wages) generated by the production of the direct and indirect requirements.
The intensity indicators of the physical flow accounts are simple multipliers that capture the sum of direct and indirect effects. They are based on the assumption that households are exogenous and that there is no feedback between wages and production (i.e. there is no induced effect included in the calculation).
Simple multiplier=(direct+ indirect effects)/ $1 exogenous final demand
It is generally acknowledged that simple multipliers underestimate economic impacts since induced households activity is absent. They can be considered as lower bounds of multiplier effects.