The Multiplier Effect

The multiplier effect is where one factor affects another, which then subsequently affects another and so on.. An positive example would be:

A car factory opens in the local area.
This would provide 2,000 workers with jobs.
Because of more jobs there is more money in the area which is then used in the local economy.
Shops and local businesses would make more money and could afford to hire more staff.
Again more money, this make the area look more proserous and attractive.
House prices rise and new houses are built.
Local Government gets greater revenue.
... It could keep on going.

As well as positive aspects of the multiplier effects, there are also negative, what happends if the car factory shuts down? It is possible for the exact opposite to happen, people lose their job, lose money and local shops lose out etc.

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The Multiplier Effect

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