What is effective demand? How will you derive the autonomous expenditure multiplier when price of final goods and the rate of interest are given?
Effective demand refers to the demand which is realised at the equilibrium level of output. Multiplier is the value which determines the level of National Income that will be multiplied due to increase in investment.
C = $\overline{C}$ + bY, b = MPC, K = 1 / 1-MPC
Where, K (investment multiplier) and MPC are directly associated.