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