Question

what is the relevance of investment multiplier in removing unemployment​

Answer 1

Answer:

Consider the road construction workers in our previous example. If the average worker has an MPC of 70%, that means they consume $0.70 out of every dollar they earn, on average. In practice, they might spend that $0.70 on items such as rent, gasoline, groceries, and entertainment. If that same worker has an MPS of 30%, that means they would save $0.30 out of every dollar earned, on average.

These concepts also apply to businesses. Like individuals, businesses must “consume” a significant portion of their income by paying for expenditures such as employees’ wages, facilities’ rents, and the leases and repairs of equipment. A typical company might consume 90% of their income on such payments, meaning that its MPS—the profits earned by its shareholders—would be only 10%.