Two factors contribute. Firstly, arteries (blood vessels that deliver blood) can expand or contract all around you body to divert blood where you need it. When you work out, your muscle needs blood, so you divert blood from somewhere else (often the GI tract (stomach and intestines)) into the muscle, so the muscle seems bigger. Second, working out causes minor damage to you muscles, and it grows back stronger after healing, which is how your muscle grows. The damage also causes inflammation, which causes water from the blood to leave the blood vessels and hang out on the muscle tissue, also increasing in volume.
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