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Investment Multiplier Calculator

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Microeconomics Macroeconomics

✖Marginal Propensity to Consume refers to the proportion of an additional unit of income that a consumer spends on consumption.ⓘ Marginal Propensity to Consume [MPC]

+10%

-10%

✖Investment Multiplier refers to the concept that any increase in public or private investment spending has a more than proportionate positive impact on aggregate income and the general economy.ⓘ Investment Multiplier [K]

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Investment Multiplier Solution

STEP 0: Pre-Calculation Summary

Formula Used

Investment Multiplier = 1/(1-Marginal Propensity to Consume)
K = 1/(1-MPC)
This formula uses 2 Variables

Variables Used

Investment Multiplier - Investment Multiplier refers to the concept that any increase in public or private investment spending has a more than proportionate positive impact on aggregate income and the general economy.
Marginal Propensity to Consume - Marginal Propensity to Consume refers to the proportion of an additional unit of income that a consumer spends on consumption.

STEP 1: Convert Input(s) to Base Unit

Marginal Propensity to Consume: 0.8 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

K = 1/(1-MPC) --> 1/(1-0.8)

Evaluating ... ...

K = 5

STEP 3: Convert Result to Output's Unit

5 --> No Conversion Required

FINAL ANSWER

5 <-- Investment Multiplier

(Calculation completed in 00.004 seconds)

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Investment Multiplier Formula

LaTeX Go

Investment Multiplier = 1/(1-Marginal Propensity to Consume)
K = 1/(1-MPC)

What do you mean by Investment Multiplier?

Investment multiplier is an important part of economic theories suggested by notable economist John Maynard Keynes. According to this concept, in the event of an increase in the investment activities either public or private which can be in the form of private consumption spending, government spending in an economy, there is a corresponding increase in the Gross Domestic Product (GDP) of the economy by a value more than the amount invested. In simple words, investment multiplier refers to the increase in the aggregate income of the economy as a result of an increase in the investments done by the government in the form of new projects.

How to Calculate Investment Multiplier?

Investment Multiplier calculator uses Investment Multiplier = 1/(1-Marginal Propensity to Consume) to calculate the Investment Multiplier, Investment Multiplier refers to the number of time by which the increase in output or income exceeds the increase in investment. Investment Multiplier is denoted by K symbol.

How to calculate Investment Multiplier using this online calculator? To use this online calculator for Investment Multiplier, enter Marginal Propensity to Consume (MPC) and hit the calculate button. Here is how the Investment Multiplier calculation can be explained with given input values -> 5 = 1/(1-0.8).

FAQ

What is Investment Multiplier?

Investment Multiplier refers to the number of time by which the increase in output or income exceeds the increase in investment and is represented as K = 1/(1-MPC) or Investment Multiplier = 1/(1-Marginal Propensity to Consume). Marginal Propensity to Consume refers to the proportion of an additional unit of income that a consumer spends on consumption.

How to calculate Investment Multiplier?

Investment Multiplier refers to the number of time by which the increase in output or income exceeds the increase in investment is calculated using Investment Multiplier = 1/(1-Marginal Propensity to Consume). To calculate Investment Multiplier, you need Marginal Propensity to Consume (MPC). With our tool, you need to enter the respective value for Marginal Propensity to Consume 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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