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A new factory hires workers, purchases materials from local suppliers and increases spending at nearby shops through its employees' wages. Which interpretation correctly distinguishes these economic effects?

Answer and explanation

Correct answer: Factory hiring is direct, supplier-related employment is indirect, and employment supported by employees' spending is induced

Direct employment occurs within the factory. Indirect employment arises through suppliers, while induced employment can result when workers spend their earnings on other goods and services. These categories describe different pathways of economic influence.

Related tags

Economic LinkagesDirect EmploymentIndirect EmploymentInduced Effects

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