Economists agree that the multiplier is close to zero when:

Question

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The multiplier effect is the idea that an initial increase in spending, say by the government, will lead to a larger increase in the overall income as this money flows through the economy. However, this effect is muted when the economy is already operating at or near full employment, as there are fewer resources available for firms to use to increase production in response to the increased demand. In this case, the multiplier is close to zero, meaning that government spending is unlikely to have a significant impact on the overall level of economic activity.

Economists Agree That the Multiplier Is Close to Zero When