An economic effect whereby an increase in spending (for example, of funds provided to a country by a donor) produces an increase in national income and consumption greater than the initial amount spent is called the
A) untied aid.
B) multiplier effect.
C) export-led growth effect.
D) network effect.

Question

Quizplus · Accepted Answer

The given economic effect, where an increase in spending leads to a greater increase in national income and consumption, is known as the multiplier effect. It happens because the initial spending creates a chain reaction where the recipient of the funds spends them on goods and services, which, in turn, generates income for other businesses, leading to an overall boost in economic activity.

An Economic Effect Whereby an Increase in Spending (For Example