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I came across this question in "fundamentals of microelectronics" The objective is to find out the polarity of the feedback. Could someone help me with this?

My approach to this question is as follows:

If we increase input current then the voltage at point x increases due to which the drain current of M1 increases causing a decrease in the Vout.This in turn decreases the drain current of M2 causing an decrease in the voltage at point x.Therefore the feedback is negative. Is this approach correct?

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No, you are wrong.

You wrote: "...This in turn decreases the drain current of M2 causing a decrease in the voltage at point x.".

The right statement would be:

This in turn increases the M2 drain-source channel resistance causing an increase of the voltage at point x. (This voltage, \$ V_x = I_{in} \cdot R_{channel} \$, while both \$ I_{in} \$ and \$ R_{channel} \$ are increasing in this case).

Don't forget the input source is a current source, not a voltage one. The only path for its current is the drain of M2 -> ground, no current can flow into the M1 gate. When you increase the input current, it can't decrease as it is an independent current source (it is under your full control). So your claim: ...This in turn decreases the drain current of M2... is a contradiction.

The feedback is positive.

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No - your last statement "...decrease in the voltage at point x" is NOT correct. A decrease in drain current of M2 is not possible because of the constant current source. Instead, the resistance of the D-C path increases and causes a corresponding increase in the voltage at x.

Hence, we have positive feedback.

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