Economics

Question 1

Spillover Effects

Answer 1

Spillover effects refer to a type network effect in which seemingly unrelated events in one nation can affect economies of other nations. Hence, they can be understood as a type of economic side effect or externality.

E.g. if consumer spending in the U.S. declines, it has spillover effects on the economies that depend on the U.S. as their largest export market. The larger an economy is, the more spillover effects it is likely to produce across the global economy.