Book contents
- Frontmatter
- Contents
- General Introduction
- Editorial Introduction
- Preface
- Preface to the German Edition
- Preface to the Japanese Edition
- Preface to the French Edition
- Book I Introduction
- Book II Definitions and Ideas
- Book III The Propensity to Consume
- 8 The Propensity to Consume: I. The Objective Factors
- 9 The Propensity To Consume: II. The Subjective Factors
- 10 The Marginal Propensity to Consume and the Multiplier
- Book IV The Inducement to Invest
- Book V Money-wages and Prices
- Book VI Short Notes Suggested by the General Theory
- Appendix 1 Printing Errors in the First Edition
- Appendix 2 Fluctuations in Net Investment in the United States (1936)
- Appendix 3 Relative Movements of Real Wages and Output (1939)
- Index
10 - The Marginal Propensity to Consume and the Multiplier
from Book III - The Propensity to Consume
Published online by Cambridge University Press: 05 November 2012
- Frontmatter
- Contents
- General Introduction
- Editorial Introduction
- Preface
- Preface to the German Edition
- Preface to the Japanese Edition
- Preface to the French Edition
- Book I Introduction
- Book II Definitions and Ideas
- Book III The Propensity to Consume
- 8 The Propensity to Consume: I. The Objective Factors
- 9 The Propensity To Consume: II. The Subjective Factors
- 10 The Marginal Propensity to Consume and the Multiplier
- Book IV The Inducement to Invest
- Book V Money-wages and Prices
- Book VI Short Notes Suggested by the General Theory
- Appendix 1 Printing Errors in the First Edition
- Appendix 2 Fluctuations in Net Investment in the United States (1936)
- Appendix 3 Relative Movements of Real Wages and Output (1939)
- Index
Summary
We established in chapter 8 that employment can only increase pari passu with investment unless there is a change in the propensity to consume. We can now carry this line of thought a stage further. For in given circumstances a definite ratio, to be called the multiplier, can be established between income and investment and, subject to certain simplifications, between the total employment and the employment directly employed on investment (which we shall call the primary employment). This further step is an integral part of our theory of employment, since it establishes a precise relationship, given the propensity to consume, between aggregate employment and income and the rate of investment. The conception of the multiplier was first introduced into economic theory by Mr R. F. Kahn in his article on ‘The Relation of Home Investment to Unemployment’ (Economic Journal, June 1931). His argument in this article depended on the fundamental notion that, if the propensity to consume in various hypothetical circumstances is (together with certain other conditions) taken as given and we conceive the monetary or other public authority to take steps to stimulate or to retard investment, the change in the amount of employment will be a function of the net change in the amount of investment; and it aimed at laying down general principles by which to estimate the actual quantitative relationship between an increment of net investment and the increment of aggregate employment which will be associated with it. Before coming to the multiplier, however, it will be convenient to introduce the conception of the marginal propensity to consume.
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- Information
- The Collected Writings of John Maynard Keynes , pp. 113 - 132Publisher: Royal Economic SocietyPrint publication year: 1978
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