Super Multiplier: (k and β interaction)

Super Multiplier: (k and β interaction)

The super multiplier is greater than simple multiplier which includes only autonomous investment and no induced investment, while super multiplier includes induced investment.

In order to measure the total effect of initial investment on income, Hicks has combined the k and β mathematically and given it the name of the Super Multiplier. The super multiplier is worked out by combining both induced consumption and induced investment.

1. Leverage Effect

The combined effect of the multiplier and the accelerator is also called the leverage effect which may lead the economy to very high or low level of income propagation.

Symbolically

Y= C + I_A + I_P

Y = Aggregate income.

C = Consumption expenditure

I_A= autonomous investment

I_P= induced private investment