How do you calculate the government purchases multiplier?

The government purchases multiplier is calculated using the formula ( \text{Multiplier} = \frac{1}{1 - MPC} ), where MPC is the marginal propensity to consume. This reflects how much additional consumption will occur in the economy as a result of an increase in government spending. For instance, if the MPC is 0.8, the multiplier would be ( \frac{1}{1 - 0.8} = 5 ), indicating that every dollar of government spending could lead to a total increase of five dollars in economic output.