You and I have read Sound Off gripes about "wasting" tax payer money: "Why did they waste $10,000 on that new sidewalk instead of filing all those potholes?" Priorities aside, has the money been wasted?

Google defines the multiplier effect as the cumulative reinforcing interaction between consumption, production, factor payments, and income that amplifies changes in investment, government spending, exports, and taxes.

In our example the city has given the contractor $10,000. What does the contractor do? He pays for material (concrete), wages and salaries to employees, pays off some debt and keeps some on the books for taxes and income for the stock holders.

What do the workers do with their wages? They pay bills, pay off some debt and mortgage, and (hopefully) put some in the bank for the future and taxes. The stores take their money, buy more inventory, pay their personnel, pay off some debt and keep some on their books for taxes and income.

The creators of goods and services receive money, generate more of what they do, pay overhead and their personnel, pay off some debt and keep some on their books.

The banks receive return of loans plus interest that can then be loaned out for new projects. They also pay overhead and their personnel and keep some on their books.

The government collects taxes from all these sources to pay for the sidewalk and all the other things they do.

The process continues with the buyers and sellers increasing the use of the original money several fold.