Multiplier Effect Calculator
This online calculator is used to calculate how much a county gross domestic product(GDP) will increase over time at a given MPC and MPS.
How to Calculate Multipliers :
The multiplier is an expectation of how much economic activity an investment will make. They are 3 steps involved to calculate the multipliers.
1. Calculate the Multiplier :
MPS + MPC = 1
1 represents all of the additional income. [ Example: MPS = 90% = 90/100 = 0.9 and MPC = 10% = 10/100 = 0.1. Therefore 0.9 + 0.1 = 1 (i.e MPC + MPS = 1) ]
MPS is the marginal propensity to save - the proportion of the additional income that gets saved.
MPC is the marginal propensity to consume - the proportion of the additional income that gets consumed.
spending multiplier =
( or )
Since MPC + MPS = 1, Spending multiplier =
2. Calculate the Increase in Spending :
Actual Increase in GDP = Spending × spending multiplier
3. Add the Increase to the Initial GDP :
Total GDP = GDP + Actual Increase in GDP