Spur to Investment
The Stagnationists, such as Professor Alvin Hansen of Harvard, felt that population growth was the major factor in investment in residential construction and the facilities needed to provide durable goods to an increasing number of consumers. The higher the rate of population growth G(P), the higher the level of Investment. They thought that low rates of population growth could result in a long run deficiency of Aggregate Demand.

The Multiplier
An increase in the demand for capital goods would have a multiplier effect stimulating increased consumption as well as investment expenditures. The result would be higher levels of income and employment. Professor Hansen thought that fertility decline was a long run trend. (He did not forsee the Baby Boom.) So he called his view a theory of “Secular (long term) Stagnation”.