Multiplier Effect Lab

Multiplier Effect — Spending Rounds & GDP

The multiplier effect describes how an initial increase in spending — a public works project, say — generates additional rounds of income and consumption as each recipient spends a fraction of what they receive. This simulation isolates that chain: starting from an autonomous spending injection, you can set the marginal propensity to consume and watch each round's income addition shrink geometrically toward the total multiplied impact. This is distinct from fiscal policy (which includes taxation and crowding-out) and from monetary policy entirely.

What you can do in this simulation

• Set the initial spending injection and the marginal propensity to consume
• Step through each spending round and see how income generated shrinks each iteration
• Display the cumulative GDP impact growing toward the multiplier formula result
• Change the MPC to observe how a thriftier population reduces the total multiplier
• Add a marginal propensity to import to see the open-economy multiplier

Concepts covered

multiplier · marginal propensity to consume · injection · leakage · Keynesian model · aggregate income

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