A Reinterpretation of the Keynesian Consumption Function and Multiplier Effect

We propose a microeconomic foundation of the multiplier effect and that of the consumption function using a dynamic optimization model that explains a shortage of aggregate demand and unemployment. We show that government purchases boost aggregate demand through a multiplier-like process but that the implication is quite different. It works through not an increase in disposable income but moderation of deflation, which makes money holding costly and stimulates consumption

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Year of publication:	2010
Authors:	Murota, Ryu-ichiro
Other Persons:	Ono, Yoshiyasu (contributor)
Publisher:	[2010]: [S.l.] : SSRN
Subject:	Multiplikator \| Multiplier \| Keynesianismus \| Keynesian economics \| Konsumtheorie \| Consumption theory \| Gesamtwirtschaftliche Nachfrage \| Aggregate demand \| Makroökonomische Konsumfunktion \| Aggregate consumption function \| Langzeitarbeitslosigkeit \| Long-term unemployment

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