Advertisements
Advertisements
Question
What do you mean by leakages of multiplier?
Short Answer
Advertisements
Solution
According to Prof. Peterson, a leakage in the multiplier occurs when a portion of income is not used to buy currently produced goods and services. This unspent income is considered to have leaked out of the income stream. Because of these leakages, the full increase in income is not directed toward consumption, which reduces the overall effect of the multiplier.
shaalaa.com
Is there an error in this question or solution?
