ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The multiplier effect refers to the effect on national income and product of an exogenous increase in demand. For example, suppose that investment demand increases by one. Firms then produce to meet this demand. That the national product has increased means that the national income has increased.

Detailed explanation-2: -Job multipliers refer to how many additional jobs result from the creation of one new job. For instance, a job multiplier of 2.0 means that one additional spinoff job results from one job created.

Detailed explanation-3: -The multiplier effect arises because one agent’s spending is another agent’s income. When a spending project creates new jobs for example, this creates extra injections of income and demand into a country’s circular flow.

Detailed explanation-4: -Example of the multiplier effect This can cause additional increases in the economy’s revenue generation, which then creates more opportunities for employment and income generation.