The idea that new spending creates more new spending is known as the:
A) crowding-out effect.
B) multiplier effect.
C) wealth effect.
D) interest rate effect.

Question

Quizplus · Accepted Answer

The multiplier effect is the idea that new spending creates more new spending. This is because when people spend money, the businesses that receive that money will use it to buy goods and services from other businesses, and so on. This creates a ripple effect that can lead to increased economic activity and growth.

The Idea That New Spending Creates More New Spending Is