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.