The multiplier effect occurs because

Question

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The multiplier effect refers to the chain reaction of spending that occurs when an initial increase in income leads to increased spending by individuals and businesses, who in turn generate more income and further increase their own spending. This cycle continues and leads to a larger overall increase in economic activity than the initial increase in income. Choices A, C, D, and E do not accurately describe the multiplier effect.

The Multiplier Effect Occurs Because