Explore BrainMass

What is the multiplier effect?

Homework help from our online tutors - BrainMass.com

What is the multiplier effect?

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

© BrainMass Inc. brainmass.com September 18, 2018, 11:39 am ad1c9bdddf

Solution Preview

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.