Multiplier is a two edged sword why
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Answer:
The definition of a double edged sword is something that could either help you or hurt you. An example of a double edged sword is an excuse that you were intoxicated when you behaved badly.
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Multiplier Keynesian: Its Working, Operation, Importance and Criticism
Article Shared by M. Agarwal
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Read this article to learn about the meaning, working, importance, leakages in the working and criticism of multiplier Keynesian.
Meaning and the Development:
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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Therefore, all the increases in income do not go to increase consumption to the extent of increment in income, with the result, that a gap comes to exist between the income (output) produced and consumed which must be made up by investment. Keynes believed that the initial increment in investment increases the final income by many times. To this relationship between an initial increase in investment and the final increase in aggregate income. Keynes gave the name of ‘Investment Multiplier’, also called ‘Income Multiplier’ by others.