Here explains the keynesian concept of investment multiplier both diagrametically and algebaricaly

1. Investment multiplier
Nasiya V K

2. Introduction
 Keynes’ multiplier
 Income multiplier
 It shows change in income to the change in investment
expenditure
 When there is an increment of investment income will
increase by an amount which is ‘K' times the increment in
investment.
 ∆Y=K.∆I
 K=∆Y/∆I
 K- investment multiplier

3. FEATURES OF MULTIPLIER
 1. It is a cumulative process
 2. The value of multiplier depends on the MPC
The value of multiplier varies directly with the size
of MPC
The value of multiplier varies between 1 and
infinity
When MPC =0. K=1
If MPC = 1 K=infinity
K=1/1-MPC

4. Proof
Y=C+I
∆Y=∆C+∆I
 Since C=c∆Y. Here C= MPC
∆Y=c∆Y+∆I
∆Y-c∆Y=∆I
∆Y(1-c)=∆I
∆Y=∆I/(1-c)
∆Y/∆I=1/(1-c)
K= 1/1-MPC

5. Graphical illustration of the multiplier
effect

6. Operation of the multiplier
 Backward and forward
 When investment increases it operates in a
forward Direction
 When investment declines it operates in a
backward direction.

7. Thank you