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How do you explain the 'Multiplier Effect'?

I do Edexcel's Economics.
An example of the multiplier effect is the government spending 40 million £ to subsidise construction firms to make more houses. These construction firms pass on a fraction of that money to the workers and spend some of it on raw materials. This money is then spent by workers and other firms who received money for the raw materials. Not all of the money will be passed on so the multiplier effect does continue but it kinda fades like ripples in water.
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Sameerio
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Original post by Ahmed766
An example of the multiplier effect is the government spending 40 million £ to subsidise construction firms to make more houses. These construction firms pass on a fraction of that money to the workers and spend some of it on raw materials. This money is then spent by workers and other firms who received money for the raw materials. Not all of the money will be passed on so the multiplier effect does continue but it kinda fades like ripples in water.

That would be the explanation?
Original post by Sameerio
That would be the explanation?


No an example, a definition is: The multiplier effect refers to the increase in final income arising from any new injection of spending
that was an example to help you understand it.
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Sameerio
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Original post by Ahmed766
No an example, a definition is: The multiplier effect refers to the increase in final income arising from any new injection of spending
that was an example to help you understand it.

Ah, ok. Thanks
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BC95
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Original post by Sameerio
I do Edexcel's Economics.


Try this if you need further info:

www.petragrade.com/MultiplierAndAccelerator.html

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