How to calculate the spending multiplier?

Understand the Problem

The question is asking for the method to calculate the spending multiplier, which is an important concept in economics that measures the effect of an increase in spending on the overall economy.

Answer

1/MPS

The final answer is 1/MPS

Answer for screen readers

The final answer is 1/MPS

More Information

The spending multiplier is used to show how initial spending leads to more spending, and results in a greater overall increase in GDP.

Tips

A common mistake is confusing MPS with MPC (Marginal Propensity to Consume). Remember, MPS is used directly in the formula for the spending multiplier.

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