The output multiplier measures the indirect and induced effects of an extra unit of direct impact spending on economic activity within the local economy.

Question

Quizplus · Accepted Answer

This statement is true. The output multiplier is a measure of how much additional economic activity (output) is generated in a local economy as a result of an extra unit of direct impact spending. This includes both indirect effects, which are generated when direct impact spending creates additional economic activity in supplier industries, and induced effects, which are generated when incomes earned from the direct and indirect effects of spending are spent on locally produced goods and services.

The Output Multiplier Measures the Indirect and Induced Effects of an Extra