Quote Originally Posted by texaspackerbacker
Government investment in infrastructure - the injection of income results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

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Thank you, Bobblehead. Is this not exactly the description I have given of the Multiplier--several times now? Keynes may have limited the effect to spending on "infrastructure", but give me one good reason why the same should not apply to ANY money spent domestically--which, of course, becomes SOMEBODY'S income. The same, of course, applies to tax cutting, which also leaves more money in the hands of consumers and investors.
Because that isn't what the MM is...it is freaking formula. It is based on LOANS...not money being spent.

The simple money multiplier is 1/R, where R is the ratio of required reserves to deposits. In a more complex world, the money multiplier must allow for the possibility that individuals retain some proportion of their money in the form of cash rather than deposits. In addition, it must allow for the possibility that banks may wish to retain some reserves in excess of the required amount.