Economic Multiplier Effect

The Economic Multiplier Effect refers to the concept that an initial change in spending can lead to a greater overall impact on the economy. For example, when a government invests in building a new road, construction workers earn wages, which they spend on local businesses. Those businesses then hire more staff or buy more supplies, generating further spending. This chain reaction amplifies the original investment, resulting in increased economic activity and job creation beyond the initial amount spent. Essentially, it illustrates how money circulates in an economy and the broader benefits of initial expenditures.