The Multiplier Process as Market Exchange Process A Contribution to the micro Foundation of Keynesian macroeconomics Abstract Traditional equilibrium analysis has been incorrectly founded once an"ordering issue"is concerned. To circumvent this problem, the autonomous demand, which has been missed in traditional microeconomic analysis, has to be introduced into the system as a starting point of a quence of market exchanges. Foll his direction, Keynes's multiplier analysis can also b viewed as a description of the process through which market exchanges are generated. Further, the Keynesian macroeconom ic re lation can also be proved within a micro econom ic context. JEL DO 0) he consensus in macroeconomics that prevailed until the early faltered because of no flaws, one empirical and the other theore tical theoretical flaw was that the consensus view leff a chasm betwveen microeconomic principles and macroeconomic practice that was too great to be intellectually satisfying. (Mankiw, 1990, pp. 1647) I Introduction Last twenty years have witnessed two opposite research directions. One, entitled as New Classical, is to explain macroeconomic phenomena based on an individual choice-theoretic framework of trad itional microeconomics-though the axiom of rational expectation is often adopted. The other is the attempt to reconstruct microeconomics so as to put Keynesian macro- analysis on a firmer foundation. This category is now termed New Keynesian. Is the "chasm still left? We believe (indeed many believe)"it is! " It is still not obvious what is the micro foundation of Keynesian macroeconomics2 The Multiplier Process as Market Exchange Process A Contribution to the Micro Foundation of Keynesian Macroeconomics Abstract Traditional equilibrium analysis has been incorrectly founded once an "ordering issue" is concerned. To circumvent this problem, the autonomous demand, which has been missed in traditional microeconomic analysis, has to be introduced into the system as a starting point of a sequence of market exchanges. Following this direction, Keynes's multiplier analysis can also be viewed as a description of the process through which market exchanges are generated. Further, the Keynesian macroeconomic relation can also be proved within a micro economic context. (JEL D0, E0) "The consensus in macroeconomics that prevailed until the early 1970s faltered because of two flaws, one empirical and the other theoretical. ... The theoretical flaw was that the consensus view left a chasm between microeconomic principles and macroeconomic practice that was too great to be intellectually satisfying." (Mankiw, 1990, pp. 1647) I. Introduction Last twenty years have witnessed two opposite research directions. One, entitled as New Classical, is to explain macroeconomic phenomena based on an individual choice-theoretic framework of traditional microeconomics ⎯ though the axiom of rational expectation is often adopted. The other is the attempt to reconstruct microeconomics so as to put Keynesian macro￾analysis on a firmer foundation. This category is now termed New Keynesian. Is the "chasm" still left? We believe (indeed many believe) "it is!". It is still not obvious what is the micro foundation of Keynesian macroeconomics