• The investment multiplier refers to the incentive effect of public or private investment.
  • It has its roots in the economic theories of John Maynard Keynes.
  • The value of the investment multiplier depends on two factors: the marginal propensity to consume (MPC) and the marginal propensity to save (MPS).
  • A higher investment multiplier suggests that investment will have a greater stimulus effect on the economy.