The working of the multiplier assumes the following process:-
Change in investment causes changes in income. As a result, there is change in consumption. Consumption expenditure of one person is an income of the other. Hence, change in consumption leads to change in income. This process continues ΔC falls to zero. Process of multiplier works in two ways- With increase in investment multiplier, increases income many times more. It is called backward action of the multiplier.
