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19 Nov 2021
Introduction
The multiplier effect indicates that an injection of new spending (exports, government spending or investment) can lead to a larger increase in final national income (GDP). This is because a proportion of the injection of new spending will itself be spent, creating income for other firms and individuals. These firms and individuals will also spend a proportion of their income, which itself creates income for other. This process continues until all no more extra income is left to be spent.
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