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What is the multiplier effect?

What is the multiplier effect?

Our expenditures are always greater than what our actual dollar value is. How does that work? Is this related?

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An increase in expenditures will increase demand and lower inventories which will cause producers to increase output. This increased output translates into increased disposable income for the workers and suppliers of the producers, which will spur consumption. This further increases ...

Solution Summary

This Solution addresses how it is possible for demand to increase by more than the initial expenditure; constraints on the multiplier effect.