122 THE GENERAL THEORY OF EMPLOYMENT BK. III

may fall as low as 2 or 3 times the employment pro-vided by a specific new investment. Thus a givenfluctuation of investment will be associated with a muchless violent fluctuation of employment in a country inwhich foreign trade plays a large part and unemploy-ment relief is financed on a larger scale out of borrowing(as was the case, e.g., in Great Britain in 1931), than ina country in which these factors are less important (asin the United States in 1932).1

It is, however, to the general principle of the multi-plier to which we have to look for an explanation of howfluctuations in the amount of investment, which are acomparatively small proportion of the national income,are capable of generating fluctuations in aggregate em-ployment and income so much greater in amplitude thanthemselves.

IV

The discussion has been carried on, so far, on thebasis of a change in aggregate investment which hasbeen foreseen sufficiently in advance for the consump-tion industries to advance pari passu with the capital-goods industries without more disturbance to the priceof consumption-goods than is consequential, in con-ditions of decreasing returns, on an increase in thequantity which is produced.

In general, however, we have to take account ofthe case where the initiative comes from an increasein the output of the capital-goods industries which wasnot fully foreseen. It is obvious that an initiative ofthis description only produces its full effect on employ-ment over a period of time. I have found, however, indiscussion that this obvious fact often gives rise to someconfusion between the logical theory of the multiplier,which holds good continuously, without time-lag, at allmoments of time, and the consequences of an expan-sion in the capital-goods industries which take gradual

1 Cf., however, below, p. 128, for an American estimate.