Keynesian Multiplier
The Keynesian multiplier is how much equilibrium output changes for a one-unit change in autonomous spending, set by the marginal propensity to consume and leakages (tax, imports).
Definition
In the simple closed model, ΔY = 1/(1 − MPC) ΔG. Open-economy and monetary-offset versions shrink it. At the ELB the multiplier can be larger because rates do not rise to crowd out. Empirical multipliers are identified, not assumed.
Why it matters
Every stimulus package is a multiplier debate. If the MPC is 0.3 and imports leak, a headline $1tn is not $1tn of GDP.
Case
ARRA 2009 vs 2020 CARES: different slack, different MPCs, different import leakages, different Fed reaction. Treating them as one number is how op-eds get written.
How to read it
Ask identification (narrative, SVAR), the state (slack vs tight), and whether monetary policy offsets. A single ‘the multiplier is 1.5’ is not a fact.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- The General Theory of Employment, Interest and MoneyKeynes · 1936 · MacmillanOrigin of the multiplier in modern macro.