62. The multiplier and marginal propensity to consume

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Discuss how the "mutiplier effect" works as proposed by Keynes. A detailed discussion of this is found in Mohr & Assoc. 5th Edition page 331.

It is important that you know and be able to explain the definition: The ratio between the eventual change in income and the initial investment is called the multiplier, the size of the multiplication effect depends on the portion of additional income that is created by the spending in each round; and that in turn depends on the marginal propensity to consume.