multiplier effect on income

Cards (3)

  • what happens when there's an injection in the circular flow?
    actual change in national income>than initial injection called multiplier effect
  • what does the size of the multiplier effect depend on?
    rate at which money leaks from the circular flow- e.g bigger the leakages, quicker the money leaves the circular flow and smaller the effect is
  • if lots of money spent on imports, multiplier effect quite small as the injection quickly leaks