The multiplier is greater than 1 because
A) corporate spending exceeds corporate income.
B) one person's spending becomes another's income.
C) most households are unable to save.
D) household spending exceeds income.

Question

Quizplus · Accepted Answer

The multiplier effect refers to the idea that one person's spending becomes another's income, and that income can then be spent again, leading to further increases in economic activity. This means that a initial increase in spending can have a larger impact on the economy as a whole, which is why the multiplier is greater than 1. Choices A, C, and D do not accurately describe the reasoning behind the multiplier effect.

The Multiplier Is Greater Than 1 Because