Question

multipler is a two edaged sword why​

Answer 1

The concept of ‘Multiplier’ occupies an important place in Keynesian theory of income, output and employment. It is an important tool of income propagation and business cycle analysis.

According to Keynes, employment depends upon effective demand, which in turn, depends upon consumption and investment (Y = C + I). Consumption function, as we have known, is stable in the short-run and MPC is less than unity.

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