Money Multiplier And The Expenditure Multiplier

My thesis starts with the income-determination model of Keynesism. All the theories of Keynesism have the following assumption: the demand determines the income. This kind of theories works out the equilibrium national income of an economy through the analyses of the mutual relationships between the effective demand and the national income. There are two ways to describe the formation process of the equilibrium income. One is to establish a function of effective demand with the independent variable of Y (which refers to income) and then let the function equal to Y and work out the equilibrium solution; the other is the multiplier theory which believes that some quantity of the original demand could form the same quantity of income which would be partly consumed and form another new income…And the whole final income would be the sum of these infinite"new incomes". The ratio of this sum and the original demand is the so-called expense-multiplier.Afterwards I illuminated the principles of the simple Deposit Creation Model. The process of deposit creation is like the following: the central bank issues some currency as the money base, people deposit all their money in the commercial bank, then the commercial bank pays part of the money to the central bank and loan the rest of it; and the loaned money base will become new deposits and be partly loaned out again…And the final whole deposits or money supply is the sum of the above"new deposits", the ratio of this sum and the original demand is the so-called money multiplier.Through the comparison of the two models above, I concluded the common features of them and proved the feasibility to unite the two...