Can you explain the multiplier effect?

The most simple definition of the multiplier effect is an initial injection in to the circular flow of income, that results in a larger final increase in real GDP. This process is a result of additional rounds of spending, and can be shown by changes to the Aggregate Demand curve.
An injection can be in the form of Government Expenditure, Exports and Investment.
An explanation of the multiplier effect can start from the Government deciding to build a motorway. And this can be related to each outward expansion of the AD curve. One must also remember that you can have both positive and negative multiplier effects.

JB
Answered by James B. Economics tutor

2761 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Explain the statement that oligopolistic markets such as supermarkets or car manufacturers can be defined in terms of market structure or market conduct.


Discuss the possible impact of supermarket monopsony power on both food suppliers and consumers?


Define economics of scale and explain them 2 examples


Evaluate the impact of the introduction of a sugar tax on fizzy drinks in the UK.


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2025 by IXL Learning