## 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
0.833333333333333 0.833333 <-- Expenditure Multiplier
(Calculation completed in 00.004 seconds)
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IGNOU (IGNOU), India
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Operating Surplus = Value of Output-Intermediate Consumption-Compensation of Employees-Mixed Income-Consumption of Fixed Capital-Net Indirect Taxes
Components of Aggregate Demand
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Real Effective Exchange Rate
Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country
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Gross Domestic Product at Factor Cost = Gross Domestic Product at Market Price+Subsidies-Indirect Taxes
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Personal Disposable Income = Personal Income-Personal Taxes-Miscellaneous Receipts of Government
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Life Expectancy = Current Age of the Individual+Average Life Expectancy-Adjustment Factor
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Private Final Consumption Expenditure = Household Final Consumption Expenditure+Non Profit Private Institutions FCE
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## 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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