The document discusses the income multiplier concept developed by John Maynard Keynes. It explains that the income multiplier establishes a precise relationship between aggregate income and the rate of investment, given the propensity to consume. The income multiplier tells us how much the total income in the economy will increase based on an initial increase in investment. Specifically, it shows that the increase in total income will be some multiple of the initial increase in investment.
2. Introduction
The Concept of multiplier was first developed by R.F Kahn in his article
“ The Relation of home Investment to Unemployment” in June
1931.Kahn’s multiplier was employment multiplier. Keynes took the
idea from Kahn and formulated the income multiplier.
3. Concept
According to John Maynard Keynes, multiplier establishes a precise relationship
between aggregate income and the rate of investment (given the propensity to
consume).
Keynes’ Investment Multiplier tells us that if there is an initial increase
in the level of investment , by how much amount the income in the economy will
increase?
It will be shown that the increase in the income will be some multiple of
the initial increase in the level of investment.
4. • This multiplier is the most commonly quoted of all multipliers and is
usually regarded as the most important indicator of the impact of
spending in a destination. It measures the relationship between an
initial (spending) of expenditure and the increase in incomes in the
local economy that are associated with this.
