Abstract: An extended investment multiplier formula was put forward in the paper “An Extensive Study of Factors Affecting the Investment Multiplier”, which regarded investment as a function of income, thus introducing marginal propensity of investment into the formula, which made the formula more reasonable in theory. However, there is no empirical test whether investment can be regarded as a linear function of income and whether this formula is reasonable in practice. From the three dimensions of literature evidence, mechanism analysis and empirical test, it is proved that investment is a linear function of income. Based on marginal analysis and regression analysis, this paper makes an empirical analysis using the data of consumption, taxation, import, investment and income in China in the past 40 years, and compares the results of theoretical expansion with those of traditional theories. The research shows that, first, the multiplier obtained by the expansion of the theory is larger than that of the traditional theory; second, if the marginal analysis method is chosen, some abnormal data may appear in the formula of theoretical expansion, but if the method of regression analysis is chosen, the results are reasonable.

Key words: investment multiplier, theoretical expansion, investment function, empirical study