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Issue:

Technology

 

Written by:

Maude L

 

Date added:

October 31, 2011

 

Level:

College

 

Grade:

B

 

No of pages / words:

1 / 198

 

Was viewed:

6510 times

 

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Essay content:

These expenditures in turn will generate more jobs, wages, and profits, and so on with the income and spending circulating around the economy. The multiplier effect arises because of the induced increases in consumer spending which occur due to the increased incomes -- and because of the feedback into increasing business revenues, jobs, and income again...
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This process does not lead to an economic explosion not only because of the supply-side barriers at potential output (full employment) but because at each "round", the increase in consumer spending is less than the increase in consumer incomes. That is, the marginal propensity to consume (mpc) is less than one, so that each round some extra income goes into saving, leaking out of the cumulative process...
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