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Multiplier Effect

February 3, 2021

In economics, the multiplier effect refers generally to the increase in final income arising from a new injection of spending. Applied to cash assistance it refers to the indirect effects of cash assistance, whereby increased expenditure by recipients contributes to income growth for non-recipients, expansion of markets for local goods, or increased demand for services. The ‘economic multiplier’ is the estimated number by which a change in some other component of aggregate demand is multiplied to give the total amount by which the national income is increased as a result of direct and indirect benefits from that change in demand.