The multiplier effect describes how:
✓ Correct Answer: Option B
Fiscal multiplier: initial spending increase → income rises → additional spending → further income increases. Multiplier = 1/(1-MPC). Higher MPC = larger multiplier effect.
Fiscal multiplier: initial spending increase → income rises → additional spending → further income increases. Multiplier = 1/(1-MPC). Higher MPC = larger multiplier effect.