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

Question

Quizplus · Accepted Answer

The multiplier effect in economics refers to the idea that an initial increase in spending (such as government spending or household spending) will lead to a larger increase in total economic output. This is because one person's spending becomes another person's income, and that person is likely to spend some of their income, leading to a ripple effect throughout the economy. Therefore, the multiplier is greater than 1 because of the cascading impact of spending on other levels of the economy.

The Multiplier Is Greater Than 1 Because