Introduction:

John Maynard Keynes published his work "The General Theory of Employment, Interest and Money” in 1936. The General Theory has been regarded a seminal work that was based on the lessons derived from the 1929-30 Great Depression (before and after). In the mean time, Keynesian economics which was based on effective demand adjustment lay the foundations of modern macroeconomics. It has been seventy five years. But The General Theory is still calling out as the most realistic depiction of the world economies. It was its clear message which depicted that macroeconomic equilibrium in a market economy may not satisfy full employment automatically that lay the foundations of modern macroeconomics. Predecessors of Keynesian macroeconomics were dispersed among the classical economists. Apart from these predecessors, most of the classical economists with the exception of the Marxists held the opinion that market equilibrium was stable and was able to create full employment in equilibrium. Market economy is like a closed circuit system, which transforms production (supply) to income, and income to demand. In this circuit, prices and wages that deliver free and perfectly competitive signals keep market equilibrium continuously, or solve the problems of demand deficiency or excessive supply automatically as if there were an invisible hand. However, the anarchic structure hidden in the source of the capitalist market would remind us that these basic problems are too "real" and serious to be solved with theoretical assumptions and fantasies of microfounded optimization. Let’s return to Keynes’ General Theory. Discussing the foundations and historical role of the General Theory and Keynesian macroeconomics is beyond these lines. Rather, in a more modest and maybe more applicable approach, I will examine one of the most essential concepts of Keynesian macroeconomics, the multiplier.