Spending Multiplier Calculator — Keynesian Economic Multiplier
Enter an initial spending injection (government stimulus, investment, or export surge) and the marginal propensity to consume (MPC) to see the total economic multiplier and the cumulative GDP impact — with a round-by-round breakdown of how spending cascades through the economy.
Each unit of initial spending generates this many units of total economic output
- 1
Marginal propensity to save (MPS)
1 − 0.8 = 0.2The fraction of each extra dollar of income that is saved rather than spent. - 2
Spending multiplier
1 ÷ 0.2 = 5
How does this calculator work?
The Keynesian spending multiplier is 1 / (1 − MPC) = 1 / MPS. An initial injection of spending is re-spent in successive rounds, each scaled by MPC, producing a total GDP impact equal to the injection times the multiplier. With MPC = 0.8, the multiplier is 5 — each dollar of stimulus generates five dollars of total output in the long run.
Formula
How this is calculated
The Keynesian spending multiplier formalises how a single dollar of autonomous spending (government expenditure, investment, or exports) ripples through an economy in successive rounds. In round one, the government spends £1 000 building a road; the construction workers receive £1 000 as income. They save a fraction (the marginal propensity to save, MPS = 1 − MPC) and spend the rest — say £800 if MPC = 0.8. Those recipients spend 80% of their £800, generating £640 of additional demand, and so on. Each round is MPC times the previous; the total converges to Initial Spending / (1 − MPC).
The multiplier is therefore 1 / MPS. An MPC of 0.8 gives a multiplier of 5, so a £1 000 stimulus eventually produces £5 000 of GDP activity — but only in the long run and assuming spare capacity, no crowding out of private investment, and no leakages beyond saving (in reality, imports and taxes also drain each round). The simple formula assumes a closed economy with only a savings leakage; open-economy multipliers are smaller.
Real-world multiplier estimates vary widely by country, time period, and type of spending. Academic studies place them between 0.5 and 2.5 for most advanced economies, with infrastructure and transfer payments differing substantially. This calculator implements the idealised textbook formula as a teaching and scenario-planning tool.
Frequently asked questions
As MPC approaches 1, MPS approaches 0 and the multiplier grows toward infinity — meaning almost no income is saved, so every round of spending is nearly fully re-spent. In practice, economies always have some leakage through imports, taxes, and precautionary saving, which limits the real multiplier.
In the simple Keynesian model with 0 < MPC < 1, yes — the multiplier is always greater than 1. In extended models that include taxes and imports (the full open-economy multiplier is 1 / (MPS + t + m)), it can be less than 1 for open, heavily taxed economies.
The spending multiplier = 1 / MPS; the tax multiplier = −MPC / MPS. Tax changes are less powerful because the first-round impact goes through household income (reduced by saving), whereas direct government spending is injected in full in round one.
TG we-Calculate Editorial Team. (2026). Spending Multiplier Calculator — Keynesian Economic Multiplier [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/spending-multiplier-calculator
TG we-Calculate Editorial Team. "Spending Multiplier Calculator — Keynesian Economic Multiplier." TG we-Calculate. 2026. https://we-calculate.com/calculator/spending-multiplier-calculator.
TG we-Calculate Editorial Team, "Spending Multiplier Calculator — Keynesian Economic Multiplier," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/spending-multiplier-calculator
@misc{wecalculate_spending_multiplier_calculator, title = {Spending Multiplier Calculator — Keynesian Economic Multiplier}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/spending-multiplier-calculator}}, year = {2026}, note = {TG we-Calculate} }
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