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Economics notes

# Formulae For And Calculation Of Multiplier In A Closed And Open Economy, With And Without A

➡️ The multiplier is an economic concept that measures the effect of an increase in spending on the overall level of economic activity.
➡️ It is calculated by dividing the change in total output by the change in spending that caused it.
➡️ The multiplier effect is an important tool for understanding how changes in spending can affect the economy as a whole.

### What is the formula for calculating the multiplier in a closed economy?

The formula for calculating the multiplier in a closed economy is Multiplier = 1 / (1 � Marginal Propensity to Consume).

### How is the multiplier calculated in an open economy?

The multiplier in an open economy is calculated by taking into account the marginal propensity to consume, the marginal propensity to import, and the marginal propensity to export. The formula for calculating the multiplier in an open economy is Multiplier = 1 / (1 � Marginal Propensity to Consume + Marginal Propensity to Import � Marginal Propensity to Export).

### How is the multiplier calculated with and without government spending?

The multiplier with government spending is calculated by taking into account the marginal propensity to consume, the marginal propensity to import, and the marginal propensity to export, as well as the marginal propensity to tax and the marginal propensity to spend. The formula for calculating the multiplier with government spending is Multiplier = 1 / (1 � Marginal Propensity to Consume + Marginal Propensity to Import � Marginal Propensity to Export + Marginal Propensity to Tax � Marginal Propensity to Spend). The multiplier without government spending is calculated using the same formula as for a closed economy, without taking into account the marginal propensity to tax and the marginal propensity to spend.

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