1. Fiscal Policy Related Formulas:
A. Average Propensity to Consume or APC:
= Consumption divided by DI
B. Average Propensity to Save or APS:
= Savings divided by DI
C. Marginal Propensity to Consume or MPC:
= Change in Consumption divided by change in DI
D. Marginal Propensity to Save or MPS:
= Change in Savings divided by change in DI

2. E. Spending Multipliers = There are three types:
1. Government Spending or Investment Multiplier
= 1/(1-MPC) or 1/MPS USED FOR AN INCREASE OR
DECREASE IN G OR IG (or C or Xn).
2. Tax Multiplier for a Tax Increase:
= -MPC/(1-MPC) or –MPC/MPS
IF THERE IS A TAX DECREASE, JUST TAKE OUT
THE NEGATIVE SIGN.
3. Balanced Budget Multiplier.
Always equals one x change in government spending
(whether a positive or negative change in G)