The Economic Impact Calculator helps estimate the total economic outcome of an event, investment, or policy by accounting for direct, indirect, and induced effects. It is part of the economic modeling and forecasting calculator category.
This tool is widely used in project analysis, feasibility studies, tourism planning, government program evaluation, and business development. Whether you’re assessing the effect of a new stadium, a music festival, or a federal stimulus plan, this calculator shows the broader economic ripple caused by that activity.
By using a multiplier, the calculator captures how initial spending triggers further rounds of economic activity—like when construction workers spend their wages, or suppliers earn more business from a large project.
formula of Economic Impact Calculator
Total Economic Impact = Initial Economic Change * Economic Multiplier
Detailed Breakdown of Components:
- Initial Economic Change: This is the amount of money directly injected into the economy. It could be spending on construction, event hosting, public programs, or business investments.
- Economic Multiplier: This factor shows how much additional economic activity is created by each dollar of the initial change. It includes:
- Indirect effects: Spending by suppliers and vendors who benefit from the original activity.
- Induced effects: Spending by employees and households whose income increases as a result.
Formula for Calculating Economic Multiplier (Simplified Keynesian Multiplier):
Economic Multiplier = 1 / (1 – Marginal Propensity to Consume)
Component Breakdown:
- Marginal Propensity to Consume (MPC): This is the fraction of new income that households spend. If MPC is 0.75, it means 75% of every dollar earned is spent on goods and services, while 25% is saved or leaks out of the economy.
- (1 – MPC): This represents the leakage. The lower this number, the higher the multiplier effect.
- Multiplier Effect: As the initial money changes hands and continues to be spent, it stimulates further economic activity. Dividing 1 by (1 – MPC) gives the total rounds of spending triggered by the original investment.
Helpful Reference Table
This table shows common values and the resulting total economic impact. It can be use for quick reference or initial planning.
| Initial Economic Change ($) | MPC | Economic Multiplier | Total Economic Impact ($) |
|---|---|---|---|
| 1,000,000 | 0.80 | 5.00 | 5,000,000 |
| 500,000 | 0.75 | 4.00 | 2,000,000 |
| 200,000 | 0.60 | 2.50 | 500,000 |
| 1,500,000 | 0.85 | 6.67 | 10,005,000 |
| 750,000 | 0.90 | 10.00 | 7,500,000 |
This reference helps planners and analysts estimate economic returns without detailed modeling.
Example of Economic Impact Calculator
Let’s say a local government plans a $1 million investment in a tourism event, and the local MPC is estimate at 0.8.
Step 1:
Calculate the economic multiplier.
Economic Multiplier = 1 / (1 – 0.8) = 1 / 0.2 = 5
Step 2:
Calculate the total economic impact.
Total Economic Impact = $1,000,000 × 5 = $5,000,000
So, a $1 million tourism investment could potentially generate $5 million in total economic activity when considering all effects.
Most Common FAQs
A good multiplier depends on the sector and region. For local projects, a multiplier between 1.5 and 3 is common. For broader programs or high-spending sectors, it can reach 5 or more.
Economic impact includes all economic activity generated—not just business profits. It looks at job creation, supplier income, employee spending, and community benefits.
Governments, non-profits, event organizers, business developers, and researchers use these calculations to justify investments and understand broader effects of economic actions.