The Investment Multiplier

The investment multiplier is a concept in economics that shows how an initial change in investment spending can lead to a larger overall impact on the economy's output (GDP). When businesses invest more in projects or infrastructure, it creates income for workers and suppliers, who then spend this income elsewhere, generating additional economic activity. This ongoing cycle amplifies the initial investment's effect, so a small increase in spending can lead to a much larger increase in total economic output. Essentially, the multiplier measures the ripple effect of investment on economic growth.