Which impact includes the direct effects on output and employment from a change in final demand?

• A. Primary impact
• B. Induced impact
• C. Direct impact
• D. Total impact

Answer: (A)

When final demand changes, the economy responds first with the direct, immediate changes in output and employment in the industries that are directly producing the goods or services whose demand shifted. This initial wave is what many sources call the primary impact. It captures the first-round effects before any ripple effects kick in through supplier relationships (indirect effects) or through higher household spending from increased incomes (induced effects). The question is asking for those immediate changes in production and jobs, which is exactly what the primary impact describes, and in many contexts is treated as synonymous with the direct impact. The total impact would include indirect and induced effects as well, but the direct/primary impact focuses on that initial change in the producing sectors.