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November 28, 2014 at 12:51 pm #21130
You are correct in your criticisms of the video. The heart of the multiplier story, as you correctly point out, is that an initial “push” to the economy from either investment or government expenditure draws in previously idle resources into economic activity and thereby raises output or real income by a multiplier, the size of which is determined by the marginal propensity to consume.
So the video starts off with an incorrect premise, largely because it ignores the interaction between an initial increase in expenditure via stimulus and how that has a snowballing effect on income via the consumption function.