Super multiplier111

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Super multiplier111

  1. 1. Super Multiplier Alok Jung Joshi
  2. 2. Introduction • Developed by Sir John Richard Hicks(19041989) • First published in his book “A Contribution to the Theory of Trade Cycle” (1950) • Mathematical derivation of the interaction of multiplier and accelerator
  3. 3. Why Super Multiplier? • Ignored the induced increase in the aggregate investment outlay • Simple multiplier was based on the Great Depression of thirties
  4. 4. Concept of Super Multiplier • Mathematical derivation of the interaction of multiplier and accelerator • It explains the combine effect of multiplier and accelerator on equilibrium income, output and employment. • Due to the inclusion of induced investment demand , super multiplier will be greater than simple multiplier • According to Super multiplier , the total income in the economy will increase by KS times the initial increase in the autonomous investment.
  5. 5. Mathematically, it is expressed as, where, ΔY = change in income ΔIa = change in autonomous investment Ks = Super multiplier
  6. 6. Derivation of the equation
  7. 7. Y S1 I1 E3 I I E2 I’a E1 I Ia S O X Y1 Y2 Y3 Output

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