ABSTRACT

Most of the many reviews of Keynes’s theory of the multiplier concentrate on the issue of savings being equal to investment and on the distinction between ex ante and ex post equilibrium. Very few of them consider the chain of events that supposedly gives rise to an income multiplication process. However, Keynes develops his theory of the multiplier on the basis of an ambiguity in his use of the central concept of the marginal propensity to consume. The fact of the matter is that Keynes attributes two separate functions to this concept.