Economics Multiplier Calculator

Calculate Multiplier Effect

Formula

To calculate the Multiplier Effect (M):

\[ M = \frac{1}{1 - \text{MPC}} \]

Where:

What is the Economics Multiplier?

The economics multiplier refers to the proportional amount of increase, or decrease, in final income that results from an injection, or withdrawal, of spending. This concept is a key component of Keynesian economics and illustrates how the economy can amplify the effects of changes in spending. The multiplier effect shows how an initial change in spending leads to a larger change in overall economic activity.

Example Calculation 1

Let's assume the following value:

Step 1: Use the formula:

\[ M = \frac{1}{1 - 0.75} = \frac{1}{0.25} = 4 \]

The Multiplier Effect is 4.

Example Calculation 2

Let's assume the following value:

Step 1: Use the formula:

\[ M = \frac{1}{1 - 0.6} = \frac{1}{0.4} = 2.5 \]

The Multiplier Effect is 2.5.