Why does the Multiplier Effect work better in a local economy

 

So, the multiplier effect is a phenomenon in economics where an initial injection of money into an economy creates a ripple effect of increased spending, leading to further economic growth. This is because when people receive more money, they tend to spend more, which then increases the incomes of the businesses they spend money at. These businesses then have more money to spend, which creates a cycle of increased economic activity.

Let's say, for example, that the government invests in a new infrastructure project, such as building a new road or bridge. This creates jobs for construction workers and stimulates spending on construction materials, which in turn stimulates spending on other goods and services. As more people are employed and have more money to spend, this creates a positive feedback loop of increased economic activity and growth.

The multiplier effect is particularly powerful in local economies, as the increased spending tends to stay within the community and benefit local businesses. For example, if a new factory opens in a small town, this can lead to more jobs, increased spending at local shops and restaurants, and ultimately, a more prosperous community.

In summary, the multiplier effect is a key concept in economics that explains how an initial injection of money can create a ripple effect of increased spending and economic growth. By investing in local economies, we can stimulate this effect and help build more prosperous and vibrant communities.

I was hoping to find a simple explanation from Professor Robert Reich. Not sure where I saw that explained before on the Net, maybe in one of his classes.

I did find this from a rather dry English economist. This is a very good explanation of the Multiplier Effect but a little (Maybe Very) dry. Many of the videos that show up on YouTube now with the title of the Multiplier Effect are explaining the usury banking process of fractional banking that helped cause the banking crash of 2008, and not what the classical economists called the Multiplier Effect.

https://www.inequalitymedia.org/ Click on videos and you can see some of the past classes and past videos of Professor Reich