Monday, March 1, 2010

Multiplier Effect

According to Wikipedia, the multiplier effect is when an initial amount of money is spent, which leads to consumer spending, which then leads to an income of a greater amount than the inital amount of money spent.

I agree with this theory because it makes sense that when an organization spends a certain amount of money on something, many people then buy it or participate in it, which usually leads to producing more money than was initially spent. However, I can disagree on the notion that the amount of consumers interested in the product of the initial spending, which would lead to a less amount of consumer spending than the initial amount spent. Consumer interest is more likely to determine the income leftover after both parties have spent their money.

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