Question

The spending-income multiplier exists because the ___ of one household become the income of another household.

Answer 1

The spending-income multiplier exists because one person's spending becomes another person's income, leading to additional spending and income. This cycle has a larger cumulative impact on GDP than the initial increase in spending.

Step-by-step explanation:

The spending-income multiplier exists because the spending of one household become the income of another household. When one person spends money, it becomes income for another person, who then spends it again, creating a cycle of spending and income. This cycle continues, leading to additional spending and income, and ultimately has a larger cumulative impact on GDP than the initial increase in spending.