As overseas leakage becomes greater,the multiplier effect
A) grows.
B) shrinks.
C) becomes more moderate.
D) is replaced with the incentive effect.

Question

Quizplus · Accepted Answer

The multiplier effect is the short-term boost in economic activity from a government spending increase or tax-cut. In a world where so many products are made overseas, it becomes more likely that fiscal stimulus will lead to increased imports rather than to faster growth at home, resulting in a shrinking multiplier effect.

As Overseas Leakage Becomes Greater,the Multiplier Effect