Keynes and the Classics: The Multiplier

Abstract

The dynamic models of the previous chapter are simple but of basic construction. They are simple because they are partial dynamics. The market for a single good is considered and the behaviour or decision relations of the models are concerned with price formation—the fixing of the price of the good. The prices of other goods, the incomes of consumers, the production techniques of firms are all ignored. There is no aggregation over different markets or different goods. It is only because of the partial analysis—the neglect of the multiplicity of inter-related variables or of aggregation—that results are obtained immediately, i.e. the movement through time of prices and of amounts bought and sold on the market.