# Spending Multiplier Calculator

URL: https://speedycalculator.com/calculators/finance/spending-multiplier/
Last updated: 2026-10-25

> The spending multiplier calculator works out the Keynesian spending multiplier from the marginal propensity to consume – with optional tax and import leakages – and the total change in GDP from a change in spending.

## Inputs

- Marginal propensity to consume (MPC)
- Tax rate (%)
- Marginal propensity to import
- Change in spending

## Results

- Simple spending multiplier
- Multiplier with leakages
- Change in GDP
- Tax multiplier

## Formula

```
Simple multiplier = 1 ÷ (1 − MPC)
With leakages = 1 ÷ (1 − MPC × (1 − t) + MPI)
Change in GDP = multiplier × change in spending
```

## Explanation

Taxes and imports "leak" spending out of the domestic circular flow, so real-world multipliers are much smaller than the textbook 1 ÷ (1 − MPC) – often estimated at 0.5–2 depending on the policy and the state of the economy.

### How to use the Spending Multiplier Calculator

- **Marginal propensity to consume (MPC)**
- **Tax rate**
- **Marginal propensity to import**
- **Change in spending**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter the MPC, the tax rate, the marginal propensity to import and the change in spending.

### Tips

- Use real (inflation-adjusted) figures to compare across years.
- Check whether data are seasonally adjusted.
- Use the same currency and base year throughout.
- Economic models simplify reality – treat results as illustrations, not forecasts.

### Common mistakes to avoid

- Mixing nominal and real values.
- Comparing percentage changes with percentage-point changes.
- Treating correlations as causes.

### Inputs explained

FieldWhat to enterMarginal propensity to consume (MPC)A numberTax rateIn %Marginal propensity to importA numberChange in spendingAmount in your currency

### What each result means

- **Simple spending multiplier** = 1÷(1 - [Marginal propensity to consume (MPC)])
- **Multiplier with leakages** = 1÷(1 - [Marginal propensity to consume (MPC)]×(1 - [Tax rate]÷100) + [Marginal propensity to import])
- **Change in GDP** = [Change in spending]×[Multiplier with leakages]
- **Tax multiplier** = 0 - [Marginal propensity to consume (MPC)]×[Multiplier with leakages]

## Worked example

Inputs — Marginal propensity to consume (MPC): 0.8; Tax rate: 0 %; Marginal propensity to import: 0; Change in spending: $100.

Results — Simple spending multiplier = 5; **Multiplier with leakages = 5**; Change in GDP = $500.00; Tax multiplier = -4.

## FAQ

**What is the spending multiplier?**
How much GDP changes for each dollar of new spending.

**How is it calculated?**
1 ÷ (1 − MPC), reduced by taxes and imports.

**What is the tax multiplier?**
−MPC × spending multiplier; it's smaller than the spending multiplier.

**What formula does the Spending Multiplier Calculator use?**
Simple multiplier = 1 ÷ (1 − MPC).