ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The value of the multiplier is further restricted by the limitation provided by the full employment ceiling. The output, income and employment will expend as a result of multiplier, as long as there are unemployed resources in the economy and full employment level is not reached.

Detailed explanation-2: -That the national product has increased means that the national income has increased. Consequently consumption demand increases, and firms then produce to meet this demand. Thus the national income and product rises by more than the increase in investment. The multiplier effect is greater than one.

Detailed explanation-3: -In terms of gross domestic product, the multiplier effect causes gains in total output to be greater than the change in spending that caused it. The term multiplier is usually used in reference to the relationship between government spending and total national income.

Detailed explanation-4: -The multiplier effect refers to any changes in consumer spending that result from any real GDP growth or contraction brought about by the use of fiscal policy. When government increases its spending, it stimulates aggregate demand, and causes some real GDP growth. That growth creates jobs, and more workers earn income.