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Daniel Isenberg 10P 6th October 2002 The Multiplier Effect If there is an increase in investment of any amount of money, the final increase in national income will increase by more than this value, known as the MULITPLIER EFFECT, argued by the economist John Maynard Keynes in his book The General Theory of Employment, Interest and Money. An example of this effect would be if a company invested £100m in new factories. The money would be spent on contractors, who would partly use it to pay their workers, who in turn would spend it on anything from food to appliances. If, for example £10m of the total £100m were spent on food, then the food manufacturers would spend this on a variety of products, further increasing the national income. Keynes argued that the multiplier effect would create new jobs within the economy as the spending that caused the creation of one job would...

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