Spending Multiplier Calculator

Calculate Spending Multiplier



Formulas

The formulas to calculate the spending multiplier are:

\[ SM = \frac{1}{1 - MPC} \]

or

\[ SM = \frac{1}{MPS} \]

Where:

What is a Spending Multiplier?

A spending multiplier is defined as the inverse of a person's marginal propensity to save. It measures the effect of a change in spending on the overall economy.

Example Calculation

Let's assume the following values:

Using the formulas to calculate the spending multiplier:

\[ SM = \frac{1}{1 - 0.8} = 5 \]

or

\[ SM = \frac{1}{0.2} = 5 \]

The spending multiplier is 5.