When the government increases the level of its spending, the effects will often go well beyond the spending itself. There will often be knock-on effects in the economy as well. To illustrate this, consider the example of previously unemployed workers who are taken on by the government, say as construction workers. They will now be earning significantly more money.

Concepts

economics, fiscal policy

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Additional Tags

multiplier effect, biz/ed: government expenditure theories - the multiplier - 10bn expenditure

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Classroom Considerations

• Knovation Readability Score: 3 (1 low difficulty, 5 high difficulty)