Fiscal multiplier calculator
Turn a marginal propensity to consume into a simple closed economy spending multiplier, or add a marginal propensity to import. You can also start from a multiplier you already have and apply it to a fiscal impulse. Every step stays visible. This is classroom arithmetic, not a forecast, not a budget score, and not a recommendation of any spending or tax package. The arithmetic runs entirely in your browser.
Mode
Closed economy uses the marginal propensity to consume. The spending multiplier is 1 divided by (1 minus MPC). An optional government spending change then scales into an implied GDP change.
Share of an extra unit of income that is spent. A classroom example is 0.8. Enter a number from 0 up to, but not including, 1. Type it yourself. This page does not estimate an MPC from data.
Share of an extra unit of income that leaks into imports. A classroom example is 0.2 next to an MPC of 0.8. Enter a number from 0 up to, but not including, 1. The denominator is 1 minus MPC plus MPI, and it must stay positive. The two propensities may sum to 1 or more. Imports are added in the denominator, not subtracted again.
A positive multiplier you have already chosen. A value of 1 moves GDP one for one with the impulse in this arithmetic. If you read a figure in a CBO, OBR, or IMF discussion, type that number yourself after you have read the note. This page does not look one up.
Optional. Extra government spending in classroom units you choose. Defaults use 10. With the default MPC, the implied GDP change is 50. Leave blank if you only want the multiplier. A negative number is a spending cut.
Multiplier
Implied GDP change
How to read this
Arithmetic
Closed economy defaults use an MPC of 0.8. The multiplier is 5. A government spending change of 10 lines up with a GDP change of 50. Open economy defaults keep that MPC and set MPI to 0.2. The multiplier is 2.5, and the same spending change of 10 lines up with a GDP change of 25. Published multiplier defaults use a multiplier of 1 and an impulse of 10, so the implied GDP change is 10. Those figures are classroom arithmetic. They are not a claim about any budget in the UK or the United States.
Not investment advice and not a recommendation of any budget package. Nothing here says a government should spend more, spend less, tax more, or tax less. A large multiplier is not a forecast of the next GDP release. The calculator does not fetch live data and does not invent a coefficient from CBO, OBR, or IMF publications.
The classroom formula
This page uses three classroom sketches. You pick the mode.
Spending multiplier (closed economy) ≈ 1 / (1 − MPC)
Spending multiplier (open economy) ≈ 1 / (1 − MPC + MPI)
Implied GDP change ≈ multiplier × impulse
MPC is the marginal propensity to consume. MPI is the marginal propensity to import. In the closed economy sketch, an MPC of 0.8 leaves 0.2 of extra income unspent, so the multiplier is 1 divided by 0.2, which is 5. The same idea is an infinite round of spending: the first unit of government spending raises GDP by 1, then by 0.8, then by 0.64, and so on. Those rounds sum to 5. The calculator reports that sum. In the open economy sketch, imports add another leakage, so the denominator is 1 minus MPC plus MPI. With an MPC of 0.8 and an MPI of 0.2, the denominator is 0.4 and the multiplier is 2.5.
The third mode does not derive the multiplier. It multiplies a k you type by an impulse you type. That product is classroom arithmetic, not official scorekeeping. Tax multipliers often differ from spending multipliers. This page does not supply a tax coefficient. If you want a tax sketch, type a tax multiplier you have already read. Enter a tax increase as a negative impulse and a tax cut as a positive impulse, in a spending style sign, and only if that sign matches the multiplier you chose.
For the reasons published estimates move around, read fiscal multipliers explained. A fiscal impulse can meet a monetary response. The Taylor rule calculator is a separate sketch of a policy rate given inflation and an output gap. The real interest rate calculator separates a nominal rate from inflation. The output gap calculator compares actual output with potential output. Wider context sits on the GDP topic and the monetary and fiscal policy topic.
A multiplier is one way to size a shift of aggregate demand. The aggregate demand and aggregate supply model shows the price level and real GDP after that shift.
Where to find the inputs
Type your own numbers. This page does not download official series. For a US discussion of how fiscal options affect output, read Congressional Budget Office analyses and type any multiplier you decide to use. For a UK discussion, read Office for Budget Responsibility material around budgets and forecasts. The IMF reviews multiplier evidence in research and in fiscal work. Federal Reserve and Bank of England research pages discuss how monetary policy can offset a fiscal impulse. None of those institutions is quoted as a number on this page.
UK and US framing
Do not paste a US multiplier onto UK data and call the result a fact. The UK is more open to trade than the United States, so import leakages are a common reason the two discussions look different. Institutions differ too. The Congressional Budget Office scores US federal options. The Office for Budget Responsibility assesses UK measures. An IMF research range is not a prediction for either country. A multiplier of 5 next to an MPC of 0.8 is classroom arithmetic. A multiplier in a published note is an estimate with a horizon, a state of the economy, and a monetary policy assumption attached. Read those footnotes before you type.
Sources
- IMF, Growth Forecast Errors and Fiscal Multipliers (working paper)
- Congressional Budget Office
- Office for Budget Responsibility
- Federal Reserve, Economic Research
- Bank of England, Working papers
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