what is the investment multiplier 
the term investment multiplier refers to the concept that any increase in public or private investment spending has a more than proportionate positive impact on aggregate income and the general economy it is rooted in the economic theories of john maynard keynes the multiplier attempts to quantify the additional effects of investment spending beyond those immediately measurable the larger an investment s multiplier the more efficient it is in creating and distributing wealth throughout the economy 1understanding the investment multiplierthe investment multiplier tries to determine the economic impact of public or private investment for instance extra government spending on roads can increase the income of construction workers as well as the income of materials suppliers these people may spend the extra income in the retail consumer goods or service industries boosting the income of workers in those sectors 1as you can see this cycle can repeat itself through several iterations what began as an investment in roads quickly multiplied into an economic stimulus benefiting workers across a wide range of industries mathematically the investment multiplier is a function of two main factors the marginal propensity to consume mpc and the marginal propensity to save mps john maynard keynes was among the first economists to illustrate how governments can use multipliers such as the investment multiplier to stimulate economic growth through spending 1