Question

Explain the multiplier effect as it pertains to the corona virus’s impact on the economy.

Answer 1

The Multiplier effect means a certain change in the expenditure or investment expenditure would cause multiple changes in income.

Coronavirus has caused the rise in the incidents of lockdown. Many markets and offices have been closed down by the government directives. Thus, Expenditure and business activities have reduced massively. In some areas, economic activities have become standstill.

Thus, these changes in the expenditure or fall in the expenditure owing to the fear of Coronavirus would affect the national income multiple time. The Marginal propensity to consume is high in the USA, thus downward impact in the national income would also be relatively higher.