According to Baumol and Blinder, the real-world multiplier will be smaller than 1/(1 − MPC) because the 1/(1 − MPC) measure is based on

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Baumol and Blinder argue that the 1/(1 − MPC) measure, which is based on the Keynesian multiplier theory, does not account for the inflationary pressures that arise from the expansion of income. Therefore, in the real world, the multiplier effect will be smaller than the theoretical maximum of 1/(1 − MPC).

According to Baumol and Blinder, the Real-World Multiplier Will Be