What economic principle describes the relationship between an increase in one activity prompting other activities?

The principle that relates to the amplification effect of one economic activity on others is known as the Multiplier Effect. This concept illustrates how an initial increase in spending or investment in an economy can lead to further increases in income and consumption. For example, if a government invests in infrastructure, the construction workers involved will earn income that they, in turn, spend on goods and services. This spending generates additional income for other businesses, which then prompts further economic activity.

This cascading effect demonstrates how the benefits of an initial investment can multiply throughout the economy, leading to growth and increased economic activity beyond the original amount spent. The Multiplier Effect underscores the interconnected nature of economic activities and the importance of initial investments in spurring wider economic progress.