# How Do You Calculate the Tax Multiplier?

Fiscal multiplier is used to calculate the ratio of a change in national income to the change in government spending. When this exceeds one, the effect on the income is called the multiplier effect. High disposable income will cause a rise in consumption and aggregate demand in a company. How you would do this is by totaling the sum of the increases in net income for all involved. Each individual than spends a portion of their disposable income on consumer goods which causes the cycle to repeat.
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