True or false. The multiplier effect is largely due to our circular flow economy. More spending means people have more income which will then be spent so others will have more income and so on

True or false.
The multiplier effect is largely due to our circular flow economy. More spending means people have more income which will then be spent so others will have more income and so on

Answer

• True
  Explanation:
  Multiplier effect is explained by the fact that an initial change in demand has much greater final impact on the country’s national income and level of expenditure. When new demand for goods is introduced into the circular flow of income, this stimulates further rounds of spending which continues to increase the final effect on employment and output.