Concept of multiplier

The concept of multiplier was first developed by R.F. Kahn in his article “The Relation of Home Investment to unemployment” in the Economic Journal of June 1931. Kahn’s multiplier was the employment multiplier. Keynes took the idea from Kahn and formulated the Investment multiplier. So, the concept of multiplier is regarded as one of the […]

Importance or Uses of Multiplier

            The introduction of multiplier analysis in income theory is regarded as one of path-breaking contributions of Keynes to the economic theory. It is not merely theoretical concept, but also important instrument of economic policy. The importance of multiplier can be explained as follows: (1)  Importance in Investment:             The concept of multiplier established the […]

Leakages of multiplier

In common practice, working of the multiplier is affected by a larger number of dynamic factors which work over time. Multiplier not goes on raising income indefinitely. This is because of there are several leakages from the income-stream as a result of which the process of income propagation is slowed down as time passes. All […]

Criticism of classical theory

Keynes has attacked the classical theory of employment for its unrealistic assumptions. He criticised classical theory on the following grounds: (1)  Unrealistic assumption of full employment: According to Keynes, in free capitalist economy under employment equilibrium are found in reality and full employment equilibrium is exception. Because in such economies investments are not only inadequate […]

Assumptions Keynesian theory of employment

Keynesian theory of employment is based on the following assumptions: (1) The Short Period:             Keynes was writing about the short period problem of depression. Therefore, he made the specific assumption of short-period so as to concentrate on the problem at hand. Keynes assumed that the techniques of production and the amount of fixed capital […]

Keynesian Theory of Employment

M. Keynes was a great economist of 20th century. The employment theory propounded by him has great importance in the modern economic world. J.M. Keynes not only criticized the classical theory of employment but also propounded a new theory of employment by publishing his famous book, “General theory of Employment, Interest and Money” in 1936. […]