Types of Multipliers in Economics
- Prof. RF Kahn's name is connected to the employment multiplier. Professor Kahn first discussed the multiplier in 1931 when talking about the advantages of public investment on overall employment.
- According to Prof. Kahn, an initial increase in employment results in a reasonably significant increase in overall employment.
- All studies of public works demonstrate that there will be "secondary" employment resulting from public works in addition to the "original '' or "primary" job in public works.
- In the consumer goods sector, secondary employment is that which develops as a result of primary jobs in the public sector.
- The investment or pension multiplier only works if full employment is not achieved.
- In other words, it has an entire employment ceiling.
- When the ceiling of full employment is reached in an economy, shortages of factors, goods, and services begin to appear.
- As such, the multiplier after full employment begins to function only about prices and is rightly referred to as the "price multiplier."
- According to professionals, the consumption multiplier is based on the idea of "savings potential" created by Professor R. Nurkse in his well-known book "Capital Formation in Underdeveloped Countries."
- They believe that to truly end the cycle of poverty and start an economic growth process; we must utilize the potential of saving, subsistence, and the unorganized economy.
What are the types of multipliers in economics?
Economics uses various multipliers, including fiscal multipliers, Keynesian multipliers, employment multipliers, consumer multipliers, and others. The multiplier after full employment starts to function only in connection to prices. It is appropriately referred to as the "price multiplier" since shortages of factors, goods, and services arise when the economy reaches its entire employment ceiling.