The basic formula is: c=a+by.
Among them, C stands for consumption, A stands for spontaneous consumption, that is, no matter how much income is needed to survive, Y stands for disposable income, and B stands for marginal propensity to consume, that is, consumption increases by one unit of income, 0.
Substitute c=a+by for y=c+i+g, y=(i+g-a)/( 1-b).
Introduction:
1. If C is regarded as an independent variable, Y will increase as C, I and G increase, and there is no multiplier effect.
2. But the background of multiplier effect is Keynes's simple national income determination model.
This model is based on Keynes's absolute income determination theory.
According to the theory of absolute income determination, consumption is absolutely determined by disposable income.