chapter  5
13 Pages

The Simple-Multiplier Process

Here Y is national income, C consumption expenditure, I investment, s the marginal propensity to save, and k the multiplier. This system shows that the multiplier reduces itself to the marginal ratio between income and investment, as in equation (7). The familiar multiplier equation of the form expressed by (6) can now be seen as being derived by solving (I) for AY.