📈 Spending Multiplier Calculator
Estimate the Keynesian spending multiplier from the marginal propensity to consume, and see how an initial change in spending ripples through the economy.
What the spending multiplier shows
The Keynesian spending multiplier estimates how an initial injection of spending — like government spending, investment, or a stimulus payment — can generate a larger total change in overall economic output (GDP), because each dollar spent becomes someone else’s income, part of which is spent again.
How it is calculated
The multiplier equals 1 divided by the marginal propensity to save (MPS), where MPS is 1 minus the marginal propensity to consume (MPC). The MPC is the fraction of each extra dollar of income that people spend rather than save. A higher MPC means people spend more of each new dollar, producing a larger multiplier effect.
This is a simplified textbook model used for general economics education. Real economies have leakages such as taxes and imports that this basic formula does not capture, so actual multiplier effects are typically smaller than this theoretical estimate.