What refers to the effect where an initial injection of spending leads to a larger overall increase in national income?
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The multiplier effect
This concept is a key part of Keynesian economics. For example, if the government spends money on a road, that money becomes income for workers, who then spend it elsewhere in the economy.
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- In economics, what term describes the phenomenon where a specific increase in spending results in a proportionately larger increase in total national income?