Simplified expenditure-output model
Choose whether you know the marginal propensity to consume (MPC) or marginal propensity to save (MPS). Enter initial autonomous spending and a current output baseline in the same monetary unit and price basis.
Source-backed definitions
In the simplified allocation of an additional unit of income between consumption and saving:
When saving is the isolated leakage, the simple expenditure multiplier is:
This is a classroom expenditure-output benchmark. It does not establish an observed or predicted fiscal-policy effect.
Publisher arithmetic and example
The modeled increase is initial spending multiplied by the simple multiplier. The modeled total adds that increase to the entered baseline. This multiplication, addition, common-unit labeling, and display rounding are transparent publisher arithmetic.
The defaults are illustrative, not empirical estimates. For MPC 0.85, initial spending 7,500, and baseline output 25,000,000:
The MPC cap of 0.9999 and MPS floor of 0.0001 are calculator safety boundaries, not economic standards.
Limits
Taxes and imports alter the expenditure-output relationship. Capacity and price responses can prevent nominal spending from becoming equal real output. Empirical multipliers may be below one, which this simple formula cannot produce. No policy outcome, forecast, or recommendation is provided.
Sources
- OpenStax, Principles of Economics 3e, Appendix D: The Expenditure-Output Model (2022) — “Consumption as a Function of National Income” supports MPC and MPS; “Government Spending and Taxes,” “Exports and Imports,” and “Using an Algebraic Approach” support the simplified model and leakage limits.
- OpenStax, Principles of Economics 3e, 25.2 The Building Blocks of Keynesian Analysis (2022) — “The Expenditure Multiplier” supports the theoretical cumulative mechanism and the distinction from empirical multipliers.