Expenditure Multiplier Calculator

✖Initial Consumer Price Index is a measure that examines the initial weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.ⓘ Initial Consumer Price Index [INCPI]			+10% -10%
✖Change in Government Spending refers to any alteration made by the government in the amount of money it allocates towards its expenditures.ⓘ Change in Government Spending [ΔG]			+10% -10%

✖Expenditure Multiplier is a concept used in economics to quantify the impact of changes in autonomous spending on overall economic output.ⓘ Expenditure Multiplier [EM]

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Formula

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Expenditure Multiplier

Formula

`"EM" = "INCPI"/"ΔG"`

Example

`"0.833333"="100"/"120"`

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Expenditure Multiplier Solution

STEP 0: Pre-Calculation Summary

Formula Used

Expenditure Multiplier = Initial Consumer Price Index/Change in Government Spending
EM = INCPI/ΔG
This formula uses 3 Variables

Variables Used

Expenditure Multiplier - Expenditure Multiplier is a concept used in economics to quantify the impact of changes in autonomous spending on overall economic output.
Initial Consumer Price Index - Initial Consumer Price Index is a measure that examines the initial weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
Change in Government Spending - Change in Government Spending refers to any alteration made by the government in the amount of money it allocates towards its expenditures.

STEP 1: Convert Input(s) to Base Unit

Initial Consumer Price Index: 100 --> No Conversion Required
Change in Government Spending: 120 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

EM = INCPI/ΔG --> 100/120

Evaluating ... ...

EM = 0.833333333333333

STEP 3: Convert Result to Output's Unit

0.833333333333333 --> No Conversion Required

FINAL ANSWER

0.833333333333333 ≈ 0.833333 <-- Expenditure Multiplier

(Calculation completed in 00.004 seconds)

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Created by Aashna

IGNOU (IGNOU), India

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Verified by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

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< 20 Macroeconomics Calculators

Operating Surplus

Go Operating Surplus = Value of Output-Intermediate Consumption-Compensation of Employees-Mixed Income-Consumption of Fixed Capital-Net Indirect Taxes

Components of Aggregate Demand

Go Components of Aggregate Demand = Private Consumption Expenditure+Investment Expenditure+Government Expenditure+Net Exports

Real Effective Exchange Rate

Go Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country

Net Factor Income from Abroad

Go Net Factor Income from Abroad = Net Compensation of Employees+Net Income from Property and Entrepreneurship+Net Retained Earnings

National Disposable Income

Go National Disposable Income = National Income+Net Indirect Taxes+Net Current Transfers from the Rest of the World

Gross Domestic Product at Factor Cost

Go Gross Domestic Product at Factor Cost = Gross Domestic Product at Market Price+Subsidies-Indirect Taxes

Change in Money Supply

Go Change in Money Supply = (1/Required Reserve Ratio)*Change in Bank Reserves-(Initial Deposit Amount)

Personal Disposable Income

Go Personal Disposable Income = Personal Income-Personal Taxes-Miscellaneous Receipts of Government

Life Expectancy

Go Life Expectancy = Current Age of the Individual+Average Life Expectancy-Adjustment Factor

Private Final Consumption Expenditure

Go Private Final Consumption Expenditure = Household Final Consumption Expenditure+Non Profit Private Institutions FCE

Gross National Product at Market Price

Go Gross National Product at Market Price = Gross Domestic Product at Factor Cost+Net Factor Income from Abroad

Net Domestic Product at Factor Cost

Go Net Domestic Product at Factor Cost = Net Domestic Product at Market Price-Net Indirect Taxes

Net Domestic Product at Market Price

Go Net Domestic Product at Market Price = Gross Domestic Product at Market Price-Depreciation

Growth Rate of Money Supply

Go Growth Rate of Money Supply = Rate of Inflation+Growth Rate of Real Gross Domestic Product

Real Gross Domestic Product Per Capita

Go Real Gross Domestic Product Per Capita = Real Gross Domestic Product/Total Population

Expenditure Multiplier

Go Expenditure Multiplier = Initial Consumer Price Index/Change in Government Spending

Gross National Disposable Income

Go Gross National Disposable Income = Net National Disposable Income+Depreciation

Velocity of Money

Go Velocity of Money = Nominal Gross Domestic Product/Money Supply

Real Wage

Go Real Wage = Nominal Wage/Consumer Price Index

Simple Deposit Multiplier

Go Simple Deposit Multiplier = 1/Required Reserve Ratio

Expenditure Multiplier Formula

Expenditure Multiplier = Initial Consumer Price Index/Change in Government Spending
EM = INCPI/ΔG

What do you mean by Expenditure Multiplier ?

Expenditure Multiplier is a measuring tool to analyse the change in output for every extra rupee spent by the government. The expenditure multiplier indicates how much a change in autonomous spending will affect total spending in the economy. It is derived from the Keynesian consumption function, which states that as income increases, consumption increases, but not by the full amount of the increase in income because households save a portion of their income.However, it's important to note that the size of the multiplier can vary depending on factors such as the marginal propensity to import (MPM), which represents the proportion of additional income spent on imports rather than domestic goods and services. Additionally, the multiplier may be influenced by other economic factors such as taxes, interest rates etc.

How to Calculate Expenditure Multiplier?

Expenditure Multiplier calculator uses Expenditure Multiplier = Initial Consumer Price Index/Change in Government Spending to calculate the Expenditure Multiplier, Expenditure Multiplier is a measurement mechanism to evaluate the total change in real GDP that results from a change in autonomous expenditure, such as investment, government spending, or exports. Expenditure Multiplier is denoted by EM symbol.

How to calculate Expenditure Multiplier using this online calculator? To use this online calculator for Expenditure Multiplier, enter Initial Consumer Price Index (INCPI) & Change in Government Spending (ΔG) and hit the calculate button. Here is how the Expenditure Multiplier calculation can be explained with given input values -> 0.833333 = 100/120.

FAQ

What is Expenditure Multiplier?

Expenditure Multiplier is a measurement mechanism to evaluate the total change in real GDP that results from a change in autonomous expenditure, such as investment, government spending, or exports and is represented as EM = INCPI/ΔG or Expenditure Multiplier = Initial Consumer Price Index/Change in Government Spending. Initial Consumer Price Index is a measure that examines the initial weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care & Change in Government Spending refers to any alteration made by the government in the amount of money it allocates towards its expenditures.

How to calculate Expenditure Multiplier?

Expenditure Multiplier is a measurement mechanism to evaluate the total change in real GDP that results from a change in autonomous expenditure, such as investment, government spending, or exports is calculated using Expenditure Multiplier = Initial Consumer Price Index/Change in Government Spending. To calculate Expenditure Multiplier, you need Initial Consumer Price Index (INCPI) & Change in Government Spending (ΔG). With our tool, you need to enter the respective value for Initial Consumer Price Index & Change in Government Spending and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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