The basic reason for the multiplier effect is that when you spend money,

Question

Quizplus · Accepted Answer

The multiplier effect refers to the impact that an initial increase in spending has on total economic output. When you spend money, someone else receives income, and they in turn are likely to spend some of that income, leading to more income for others and more spending in the economy overall. This cycle of spending and income generation ultimately leads to a larger increase in economic output than the initial amount of spending.

The Basic Reason for the Multiplier Effect Is That When